Kernobsttag Netto-Markendiscount Pipfruit - Outlook season 2012/13 Helwig Schwartau, AMI.
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The Pipfruit Export Season at the Port of
Napier Container Terminal: an Exploratory
Case Study
A thesis submitted in partial fulfilment of the requirements for the degree of
Master of Logistics and Supply Chain Management
at Massey University
Palmerston North Campus
New Zealand
Karl Mberikwazvo Tichatonga Mudzamba
2010
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Abstract
This is an exploratory study seeking to gain a better understanding of seasonality at the
Port of Napier container terminal. It seeks to explore the motives behind the actions of
the pipfruit exporters, and analyse the impact seasonal reefer (refrigerated containers)
volumes have on terminal operations. The case study method is employed because it
reflects the interpretive assumptions adopted for the study, and has the tools to analyse
the qualitative and quantitative data collected.
The study revealed the exporters source most of their fruit from their own and leased
orchards. The guaranteed volumes justify the investments made in fruit handling
facilities. The balance of their fruit comes from contract growers where the exporters
seek to establish long term relationships to minimise supply uncertainty. The exporters
look to using their own fruit handling facilities, before passing any fruit to third parties,
because of the greater flexibility afforded by prioritising shipments in their own
facilities.
The exporters have invested in information systems that have automated most of the
previously manual processes, and assist with managing the complexity of compliance,
improving visibility in their operations, and satisfying the traceability requirements of
their customers. The exporters have retail programs in place with customers in their
traditional markets (US and Europe) that enable them to manage their work load for the
entire season. The exporters have increasingly directed marketing efforts to the fixed
price markets in mostly Asia, the Middle East and Russia, because the upfront
payments, shorter transit times and fixed prices, reduce the risk of serving the markets.
The fixed price sales are very much on short notice and present unique challenges on
logistic systems, as the emphasis is on expediting shipments to get the best prices. The
success of exclusive varieties and licensed orchards give the exporters much hope,
particularly with the latter, as they are able to maintain fresh supplies all year round.
The exporters select shipping lines on the basis of transit times and port calls but are in
reality, at the mercy of the powerful shipping lines They have to base their marketing
plans on the schedules of the lines. Chartering offers a way around the rigid schedules
of the shipping lines, though only one exporter currently exercises this option.
The impact of the pipfruit export season in the terminal is evident on its impact on
several aspects of terminal operations. Container vessel calls increase, as shipping lines
deploy ‘extra loaders’ to complement their regular services to deal with the added cargo
volumes. Vessel exchange times lengthen to reflect the increase in containers
exchanged. Reefer capacity utilisation rises well above the average, though reefer dwell
times decrease to reflect the pressure exporters work under during the season that
almost reduces them to packing reefers just-in-time for vessels. The number of
rehandles rises to mimic the added container volumes as the terminal employs strategies
to cope with the scarcity of reefer space.
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Acknowledgments
Firstly I’d like to thank the staff members at the College of Science at Massey, my
supervisor Dr Norman Marr for the invaluable advice and guidance throughout a
journey of self discovery, Alan Win for his encouragement and Kathy Hamilton for
fielding and answering countless questions from me.
My research would not have been possible were it for the help I got from Christine
McRae and Rex Graham in the early days of my research. I’m eternally grateful to all
the exporter’s representatives who I cannot name who agreed to talk to me. I’d like to
thank several colleagues at the Port of Napier, Chris Bain and Guy Stone for kindly
allowing me to conduct my research, Tony Des Landes and Andrew Locke for their
time and patience in my endless requests for contacts and information.
A very special thank you goes to my parents, the most generous people I’ve ever
known, thank you for all your encouragement and belief in me. I’d also like to thank
Natasha for the constant words of encouragement, taking over cooking duties when I
had to get my head down, and for being a sounding board for my thoughts. Another
special thank you goes to the rest of my family who supported and encouraged me
throughout. My good friends Nelson and Mandy Gapare proved an inspiration to me, I
feel privileged to call them my friends. I’m indebted to Ethel Matshiya who kindly
agreed to proof read my thesis from so far away! Last but not least I’d like thank God
for giving me the opportunities I’ve had to chase my dreams.
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Table of Contents
Abstract ................................................................................................................................... ii
Acknowledgements ............................................................................................................... iii
Table of Contents .................................................................................................................. iv
List of Tables ........................................................................................................................ vii
List of Figures ...................................................................................................................... viii
Chapter 1: Introduction ......................................................................................................... 1
1.1 Introduction .................................................................................................................... 1
1.2 Background to Study ..................................................................................................... 1
1.3 Problem Definition ........................................................................................................ 4
1.4 Research Objectives and Questions ............................................................................... 6
1.5 Outline of Thesis ............................................................................................................ 6
Chapter 2: Industry Review ................................................................................................... 8
2.1 Introduction .................................................................................................................... 8
2.2 History ........................................................................................................................... 8
2.3 Current Situation .......................................................................................................... 19
2.4 Future development ..................................................................................................... 21
2.5 Summary ...................................................................................................................... 23
Chapter 3: Literature Review .............................................................................................. 25
3.1 Introduction .................................................................................................................. 25
3.2 Container Handling Equipment Systems ..................................................................... 25
3.3 Rehandles ..................................................................................................................... 28
3.3.1 Sources of Rehandles ........................................................................................... 28
3.3.2 Rehandling Export Containers ............................................................................. 30
3.3.3 Rehandling Import Containers ............................................................................. 33
3.4 Capacity Issues ............................................................................................................ 35
3.4.1 Capacity Constraints in Terminals ....................................................................... 35
3.4.2 Inland/Satellite Container Terminals ................................................................... 40
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3.5 Summary ...................................................................................................................... 42
Chapter 4: Research Methodology ...................................................................................... 44
4.1 Introduction .................................................................................................................. 44
4.2 Research Objectives ..................................................................................................... 44
4.3 Research Paradigms ..................................................................................................... 44
4.4 Methodology ................................................................................................................ 48
4.4.1 The Case Study .................................................................................................... 48
4.5 Research Methods ........................................................................................................ 51
4.5.1 Sampling .............................................................................................................. 51
4.5.2 Interview .............................................................................................................. 52
4.5.3 Archival Searching for Secondary Data .............................................................. 53
4.6 Data Analysis ............................................................................................................... 54
4.6.1 Content Analysis .................................................................................................. 55
4.7 Validity and Reliability ................................................................................................ 56
4.8 Ethical Issues ............................................................................................................... 58
Chapter 5: The Pipfruit Exporters ...................................................................................... 60
5.1 Introduction .................................................................................................................. 60
5.2 The Supply Base .......................................................................................................... 60
5.3 The Logistics Network ................................................................................................. 64
5.4 Information Systems .................................................................................................... 72
5.5 Selling Arrangements .................................................................................................. 76
5.6 Shipping Matters .......................................................................................................... 81
5.7 Looking Ahead ............................................................................................................ 87
Chapter 6: The Port of Napier Container Terminal .......................................................... 90
6.1 Introduction .................................................................................................................. 90
6.2 Export Handling ........................................................................................................... 91
6.3 The Pipfruit Export Season .......................................................................................... 93
6.3.1 Pipfruit Volumes .................................................................................................. 93
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6.3.2 Shipside Operations ............................................................................................. 95
6.3.3 Reefer Capacity Utilisation .................................................................................. 97
6.3.4 Container Dwell Times ...................................................................................... 100
6.3.5 Rehandles ........................................................................................................... 101
Chapter 7: Conclusions ...................................................................................................... 104
7.1 Introduction ................................................................................................................ 104
7.2 Conclusions ................................................................................................................ 104
7.2.1 The Motives Behind the Actions of the Exporter .............................................. 104
7.2.2 Analysis of the Impact Seasonal Reefer Cargo has on Terminal Operations .... 108
7.3 Limitations ................................................................................................................. 109
7.4 Future Research ......................................................................................................... 110
References ............................................................................................................................ 111
Appendices ........................................................................................................................... 117
Appendix A: Interview Request Email ................................................................................. 117
Appendix B: Interview Questionnaire .................................................................................. 118
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List of Tables
Table 2.1 – Current and Forecasts of Exports Volumes and Value ........................................ 22
Table 4.1 – Alternative Terms for the Two Main Research Paradigms .................................. 45
Table 6.1 – Container Handled in the Terminal in 2008 and 2009 ......................................... 90
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List of Figures
Figure 1.1 - The Port of Napier’s Container Volumes 2000-2009 ........................................... 3
Figure 2.1 – Exports by Volume and Value ............................................................................ 15
Figure 2.2 – The Value of the New Zealand Dollar Against Three Major Currencies ........... 17
Figure 3.1 – ‘1 over 2’ Straddle Carriers ................................................................................ 25
Figure 3.2 – Three Dimensional and Cross Sectional View of a Yard Crane Block .............. 26
Figure 3.3 – Cross Section of a Reachstacker/Forklift Bay .................................................... 27
Figure 3.4 – Reachstacker Retrieving a Container from the Second Row .............................. 28
Figure 6.1 – The Expert Decking Process ............................................................................... 92
Figure 6.2 – The Top Six Reefer Commodities by Volume for 2008 ..................................... 94
Figure 6.3 – The Top Six Reefer Commodities by Volume for 2009 ..................................... 94
Figure 6.4 – Container Vessel Calls 2008 – 2009 ................................................................... 95
Figure 6.5 – Average Vessel Turnaround Time 2008 -2009 .................................................. 96
Figure 6.6 - Average Number of Live Reefers in Port per Day .............................................. 98
Figure 6.7 – Two-way Access Bay ......................................................................................... 99
Figure 6.8 – One-way Access Bay .......................................................................................... 99
Figure 6.9 – Average Reefer Dwell Time ............................................................................. 101
Figure 6.10 – Rehandles 2008 – 2009................................................................................... 102
Figure 6.11 – Bays Showing Containers with a Change of Vessel ....................................... 103
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Chapter 1: Introduction
1.1 Introduction
The aim of this research is to gain a better understanding of the pipfruit export season at
the Port of Napier container terminal. This chapter presents the background to the study,
and states the research objectives and the research questions formulated to help achieve
the objectives.
1.2 Background to the Study
Shipping containers have been in existence for about five decades and are widely
regarded as the foundation of the unit-load concept (Steenken, Voß, & Stahlbock,
2005). Up until then labour intensive break bulk operations were the norm in ports,
where armies of harbour workers loaded and unloaded vessels in an inefficient process
that could last up to several weeks, and at considerable expense (Levinson, 2006;
Martin & Thomas, 2001). Operations were vulnerable to weather disruptions as hatch
lids were shut to protect the cargo from physical deterioration. Cargo was also
vulnerable to pilferage during port operations, as well as in transit, and mechanisation
was limited to cranes and nets that were used to lift cargo on and off vessels (Martin &
Thomas, 2001; Rosenstein, 2000). The lack of unitisation meant that each consignment
had to be physically handled at each point of transfer until it got to its final destination.
Containerisation improved packing and handling efficiencies as contents were only
handled during packing at their point of origin, and once again during unpacking at their
destination. Containers offer improved security to cargo and protect it from the
elements, so loading and unloading operations are not as prone to weather induced
delays as break bulk operations are (Steenken et al., 2005). The unitised loads vastly
improved vessel exchange rates and enabled smooth intermodal transfers. The gains in
productivity and efficiency translated into lower handling costs, opportunities to gain
economies of scale in operations, and ultimately lowered the cost of shipping.
The first regular container service began around 1961, and ran between ports on the
Eastern Coast of the US, the Caribbean, and Central and South America. Prosperity
soon followed significant investments that were made in specially designed vessels,
container handling equipment in ports, and the purchase and/or leasing of containers
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(Steenken et al., 2005). This transformation gave rise to container terminals where the
large volumes of transshipments of containers made it economical for vessels to call in,
as well as road and rail carriers. Container terminals provide temporary storage that
enable vessel loads to be consolidated in anticipation of vessel arrivals, and enable
containers discharged to be stored prior to departure by road or rail. Sea container
terminals are essentially the buffer, and add value by being the point of transfer between
the land and sea transport modes. Containerisation eliminated many of the efficiencies
inherent in break bulk operations such as the armies of harbour workers that needed
extended periods to work vessels. The handling efficiencies brought on by
containerisation meant vessels could be turned around in for example, an eight hour
shift by eight men operating container handling equipment, where as it would have
taken 26 harbour workers over a week to work a vessel in a break bulk operation
(Rosenstein, 2000).
There has been a massive growth in containers in circulation in the last 30 years and this
has been directly responsible for the dramatic growth in global trade. Container
terminals hold a special place in global supply chains as they are the gateways to
foreign trade. This growth has been matched by the increase in vessel sizes as the
shipping lines seek to gain economies of scale in their operations. Container terminals
have had to make significant investments in deepening channels, as well as acquiring
container handling equipment capable of handling these larger vessels. This has resulted
in increased competition between terminals, particularly those in the same geographic
locations. The terminals compete for services of the shipping lines (both short and deep
sea), rail and road carriers (Günther & Kim, 2006; Kim, 2005; Steenken et al., 2005).
To compete effectively container terminals need to fully utilise their assets whilst
focussing on improving productivity to lower costs. Ultimately they are judged on how
quickly they can turn around vessels, trains and trucks, and on what handling rates they
charge (Kim, 2005; Steenken et al., 2005). These competitive forces faced by the
terminals have forced them to eliminate inefficiencies in their operations, and by so
doing, have helped global supply chains in their quest for lowest total cost.
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Figure 1.1 The Port of Napier’s Container Volumes 2000-2009
The Port of Napier has experienced its own significant growth in container volumes as
seen in figure 1.1 above. This has been largely due to the migration of break bulk cargo
to containers. Container volumes have more than doubled in the last 10 years and the
terminal has seen increasingly larger vessels calling. The largest vessel to call at Napier
has been the 4578 TEUs (Twenty-foot Equivalent Unit) capacity OOCL New Zealand
(Anon, 2010d). As a result of the growth of the container business the company has
invested in mobile harbour cranes capable of twin lifting. Twin lifting occurs when
crane spreaders load and discharge two 20’ containers in one lift. The company has
purchased forklifts and reach stackers capable of stacking containers to the fourth tier to
increase the yard’s storage capacity. The yard has been developed to accommodate
more reefers (refrigerated containers), and land has been reclaimed to extend berth
capacity and increase storage space. Earlier on in the decade, the company purchased a
terminal operating system (Navis Express and SPARCS) that helps to optimise various
operations in the terminal. These investments have all been directly influenced, and
financially justified by the growth of the container business, and put the company in a
position to increase productivity, and continue to attract the business of the shipping
lines.
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1.3 Problem Definition
As an employee of the Port of Napier, the researcher has come to associate the pipfruit
export season with the significant increase in rehandling work and the scarcity of reefer
(refrigerated containers) storage space. This study is motivated mostly by the
researcher’s long standing desire to gain a better understand of the pipfruit export
season. An extensive search of the literature revealed very little about seasonality in
container terminals but the individual problems of rehandles and capacity issues have
received attention from academics.
Chen (1999) highlighted that the choice between the ‘pre-marshalling’ and ‘sort and
store’ strategies for export container storage influences the number of rehandles
(unproductive moves) performed. The ‘pre-marshalling’ strategy stacks exports
randomly and then sorts mixed stacks closer to the time of vessels arriving, to suit the
loading sequence because of the scarcity of storage space. This strategy generates
significant rehandles. The ‘sort and store’ strategy attempts to sort each container as it
arrives at the gate, and is only effective in terminals with ample storage space. There are
fewer rehandles generated with this strategy.
Kim and Bae (1998), Kang, Oh, Ahn, Ryu and Kim (2006), Lee and Hsu (2007), Lee
and Chao (2009), Park, Park and Ryu (2009), Choe, Park, Oh, Kang and Ryu (2009),
all address the ‘re-marshalling’ problem which is the sorting of stacks to suit the vessel
loading sequence. The problem is addressed in different ways but with the common
objectives of minimising the number of moves to complete the process, minimising
rehandling during the process, minimising travel distances of the yard cranes and
avoiding yard crane clashes. de Castillo (1993), Kim (1997), and Kim and Kim (1999)
examine the problem of rehandles when dealing with imports. The number of rehandles
to retrieve the target container is estimated so that can be factored in when determining
the productivity of container handling equipment, and consequently what level of
service to promise customers.
Moving onto capacity issues Broens, van Dyk and Tavasszy (2000), van Dyk and
Maspero (2004), Ortmann, Vuuren and van Dyk (2006) address several capacity issues
in the South African fruit export logistics channels. Maloni and Jackson (Maloni &
Jackson, 2005a; 2005b) examine capacity issues in the US West Coast ports of Long
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Beach and Los Angeles in light of increasing container volumes. Le-Griffin and
Murphy (2006) compare the productivity of the same ports with those of leading ports
in Asia and Europe to highlight issues related to country specific factors in the
differences that exist. Murty, Wan, Liu, Tseng, Leung, Lai and Chiu (2005) report on
the use of information technology to address capacity problems in Hong Kong. Slack
(1999), Kia, Shayan and Ghotb (2002), Jarzemskis & Vasiliauskas (2007), and Roso,
Woxenius, & Lumsden (2009) argued for inland/satellite terminals to take the pressure
off sea port terminals as only the transfer function needs to be done at sea port
terminals.
What is evident is that most of the current research is based on the high throughput
terminals of the world that handle mega-vessels (In excess of 10 000 TEUs capacity)
and turnover millions of containers a year. These are container terminals that handle
volumes large enough to justify investments in deepening channels and implementing
strategies such as automated container handlings systems in their terminals.
There is a lack of attention by academics given to small container terminals like the Port
of Napier, that handle less than 200 00 TEUs per annum. Most of the available literature
addresses problems in terminals utilising yards cranes, or straddle carriers, and gantry
cranes for vessel operations. The Port of Napier container terminal uses forklifts and
reachstackers and mobile harbour cranes for vessel operations. One paper by Alvarez
(2001) was found that involved a terminal similar to the Port of Napier’s but one that
addressed an unrelated problem of the ship planning process. Very little literature was
also found on the New Zealand port industry. Price Waterhouse Coopers (2004) did an
infrastructure audit on behalf of the Ministry of Economic Development. They revealed
the uniqueness of the port industry, in that the terrain of the country and the high cost of
consolidating cargo at hub ports by rail and road favoured international calling at
numerous ports. This is unusual for a country so small. The ports themselves have
excess capacity and some are highly seasonal like the Port of Napier. The urban
waterfront locations of ports like Napier leaves options on expansion limited to
increasing productivity with existing infrastructure or expensive land reclaim. As
previously mentioned, there is a dearth of information on small container terminals, and
ports in the New Zealand context, so this study is an opportunity to help address that.
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1.4 Research Objectives and Questions
The aim of this study is to gain a better understanding of the pipfruit export season at
the Port of Napier container terminal. The study is guided in part by the following
objectives:
1.To explore the motives behind the actions of the pipfruit exporters.
2.To analyse the impact seasonal reefer cargo has on terminal operations.
The following research questions were formulated to help meet the objectives of the
study:
1.What strategies do the pipfruit exporters employ to source fruit?
2.What is the nature of the logistics network between the growers and the container
terminal?
3.What does the future hold for the pipfruit exporter?
4.What happens in the terminal during the pipfruit export season?
1.5 Outline of the Thesis
A brief outline of the rest of the chapters in this study is given: Chapter 2 presents a
brief history of the New Zealand pipfruit industry from its humble beginnings to the
innovative industry it is today. The chapter focuses on the key developments that helped
shape the current structure, developments that helped the industry to thrive despite its
heavy reliance on exports for income and vast distance from its markets.
Chapter 3 reviews the literature as it applies to seasonality in container terminals. The
chapter begins with an examination of the container handling systems used by container
terminals to help with revealing the factors behind the adoption of each. A conceptual
framework for the research is established by examining how the problem of rehandles
and capacity issues are addressed in the literature. The literature review helped shape
the research strategy of this study.
Chapter 4 explains the reasons for the interpretive approach adopted for the study. It
describes the research strategy adopted, the data collection and analysis methods. It
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narrates the procedures used for data collection and examines issues of validity,
reliability and ethical considerations.
Based on within case analysis, the results of the case study are presented over two
chapters. Chapter 5 presents the findings of the semi-structured interviews of the
exporters supported by qualitative material from the New Zealand Shipping Gazette, the
websites of the exporters and the Port of Napier weekly newsletter. Chapter 6 presents
the findings of the analysis of quantitative data from specific aspects of the container
terminal operations.
The findings of the research are summarised and conclusions reached based on the
objectives of the research in Chapter 7. The limitations of the study are explained as
well as suggestions for further research.
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Chapter 2: Industry Review
2.1 Introduction
The New Zealand pipfruit industry is unique for several reasons. A small domestic
market comprising just over 4 million residents deems the local industry heavily reliant
on foreign revenue; approximately 65% of the gross crop is exported (Anon, 2009 ).
The local industry, over the years, has had to overcome its high cost structure due to
prolonged scientific research dependence and isolation from markets to compete on the
global scene. New Zealand pipfruit has the furthest distance to travel of any exporting
nation. The industry has positioned itself in the premium segment of the market by
differentiating its product and employing creative marketing strategies. This it has
accomplished despite being a micro player on the world scene, contributing less than
1% (0.5 million tonnes) to global output and about 4.4% of global export volumes of
about 7 million tonnes (Anon, 2009 ). To appreciate the current structure of the
industry, particularly the exporters, it is essential to look back into the history of the
industry in order to understand how certain developments led to the current situation.
2.2 History
According to McKenna and Murray, “apples are a truly global fruit having been grown
domestically for the past 3000 years in different climatic regions” (2002, p496). New
Zealand’s pipfruit industry is relatively young in comparison, with the first seedlings
reportedly arriving in the mid-19th century from Europe and the USA. The seedlings
arrived to a country (New Zealand) with fewer pests and diseases till woolly aphids
came in the 1870s. The local industry was saved by the Northern Spy apple variety’s
resistance to the woolly aphid. Breeding was based on the Northern Spy rootstock and
production increased culminating in the first export shipments around 1910 (Anon,
2005b; McKenna, Le Heron, & Roche, 2001). “In 1924 the Fruit Export Control Board
was established to regulate apple and pear exports” (McKenna et al., 2001, p159).
Exports ceased during World War II and resumed in 1948, the same year Parliament
passed the Apple and Pear Marketing Act resulting in the formation of the New Zealand
Apple and Pear Marketing Board (NZAPMB) that succeeded the Fruit Control Board.
McKenna et al., define it as:
9
“a cohesive nationally based single desk export oriented cooperative structure that
structures key research, production, regulatory and marketing functions so setting
parameters of what is produced and to what ends” (2001, p158).
The passing of the Act resulted in the Board setting export standards for fruit, and was
obligated to accept and pay for all fruit meeting that standard. The Board was also
responsible for the distribution and marketing of that fruit locally and abroad.
The Nelson region was the main growing region in the early years spurred on by a
period of speculative planting between 1911 and 1916, and improved tree maintenance.
It was almost inevitable that the Hawkes Bay would surpass the Nelson region as the
largest growing region given its natural advantages. The highly productive and uniform
soils of the Heretaunga plains and the availability of irrigation water provided ideal
conditions for fruit growing. Nearby urban areas like Wellington helped sustain growth
in the early years, aided by well developed infrastructure, nearby investors and research
institutes. The latter being particularly relevant because of the industry’s dependence on
scientific research (McKenna et al., 2001). Le Heron and Roche reported that,
“..the concentration of the industry in Hawkes Bay makes it a valuable laboratory
for the study of value preserving and enhancing activity in the industry and the local
contribution to globalisation and sustainability influences” (1996, pp424-425).
The industry, in the largest of the smaller growing areas, Central Otago, began in the
1860s with the decline of alluvial gold mining. Water races originally reserved for
processing gold ore were redeployed to irrigate orchards. Unlike the two dominant
regions, orchards in Central Otago were not dedicated to one type of fruit. This, coupled
with the region’s isolation limited the expansion of the industry (McKenna et al., 2001).
It was acknowledged as far back as the 1950s that the industry could not compete in the
commodity sector because of reasons previously mentioned, a high cost structure,
distance from the markets, the small size of the industry and a small domestic market.
To focus the industry’s resources on higher earning varieties and to increase the
likelihood of competing profitably, the New Zealand Apple and Pear Marketing Board
(NZAPMB) deliberately paid the growers more for 15 out of the 139 varieties grown
then (Scott, 1994).
10
The NZAPMB’s efforts were complemented by the government through the
Department of Scientific and Industrial Research (DSIR, later to become HortResearch)
that funded horticultural research (Le Heron & Roche, 1996). The Department of
Scientific and Industrial Research (DSIR) launched an apple breeding program in the
late 1950s aimed at developing new and unique varieties for export and improving “fruit
quality, storage, yield, and pest and disease resistance with desired growing habits” (Le
Heron & Roche, 1996, p424). Under the guidance of Dr. Don McKenzie, this program
came about after the DSIR examined several varieties from overseas but found very few
were suitable for New Zealand growing conditions (Anon, 2005b). These strategic
initiatives enabled growers to focus on orchard management issues. The single desk
gave the local industry the ability to gain economies of scale in activities such as cool
storage and shipping, and more significantly, strength by volume, when negotiating
freight rates and supply contracts.
Increased investment in storage and production technology helped the local industry
grow steadily up until the 1960s. The 1970s slowed this steady rise, in fact the
commercialisation of the Braeburn and Royal Gala varieties was credited with saving
the local industry from total collapse (McKenna & Murray, 2002). McKenna and
Murray further reported that the challenges in the 1970s emanated from:
” increased production by both Northern and Southern Hemisphere producers, rising
freight costs, shifting consumer preferences and the entry of the UK into the
European Economic Community that all combined to worsen New Zealand’s
competitive position” (2002, p502).
The tale of the commercially successful Braeburn and Royal Gala varieties narrates the
industry’s triumphs despite being a very small player in a very competitive global
market. These varieties were developed locally in the 1960s and first sold on global
markets in the 1970s (McKenna & Murray, 2002). New Zealand’s competitors
(particularly Chile and Brazil) imitated these varieties but were unable to replicate the
quality of New Zealand fruit. The quality of fruit can be put down to the efforts of the
DSIR, and the NZAPMB, who worked closely with the growers to overcome problems
of disease, pests and storage life that afflicted the fruit in the early years (Le Heron &
Roche, 1996). In the last 20 years competitors have managed to significantly close this
11
quality gap and at a lower cost (Chile in particular). This development has relegated the
varieties to almost commodity status today, and eroded the margins previously enjoyed
by the local industry.
On November the 8th, 1981, New Zealand signed up to the International Union for the
Protection of New Plant Varieties (UPOV). UPOV’s main objective is the protection of
newly developed plant varieties by way of intellectual property rights (UPOV, 2009).
More importantly for the local industry is that all of its main competitors (Chile,
Argentina, South Africa, and Brazil) are signatories strategically positioning it to legally
control new varieties it developed. In 1999, 65000 Sciros and Sciglo trees bearing the
locally developed Pacific Rose™ variety were discovered in Chile. Chile is New
Zealand’s main southern hemisphere competitor and traditionally competes on the
opposite end of the value scale in the industry because of its cheaper labour cost and
size. Through UPOV, the NZAPMB had the illegal plantations destroyed (Anon, 1999).
Two other significant events that had a bearing on the future structure of the local
industry occurred in the 1980s. Firstly the government embarked on implementing free
market reforms so starting a process that would eventually lead to the industry’s
deregulation (McKenna, 2000). The second was in 1985, whereby the:
“NZAPMB, the Department of Scientific and Industrial Research and some private
breeders agreed that in exchange for funding, the Board would have sole marketing
rights for new cultivars” (Le Heron & Roche, 1996, p424).
Lessons of the past hadn’t been forgotten, after assuming the risk and cost of developing
new varieties, the local industry was powerless to stop competitors imitating the
Braeburn and Royal Gala varieties. Each new variety had Plant Variety Rights
protection so imitation by competitors would only be under licensed agreements. This
event laid the platform for the later development of promising varieties such as Jazz™
and Envy™.
The NZAPMB as in the 1950s, encouraged growers to focus on potentially higher
earning varieties such as the Braeburn, Royal Gala and Fuji. In response:
12
“orchardists continued to replant at least 10% of their stock each year into the 1990s
in anticipation of the development of new varieties – a trend that buoyed production
and income into the mid 1990s” (McKenna & Murray, 2002, p502).
Export revenue steadily rose in the early 1990s peaking at $482 million in 1995 (Dobbs
& Rowling, 2006). During this period growers gradually replaced the older commodity
varieties such as Granny Smith, Red and Golden Delicious, and Cox Orange with newer
and higher earning ones with Braeburn, Royal Gala and Fuji as the core varieties.
Others included Pink Lady ™ and Southern Rose (McKenna, 1998).
In 1991 NZAPMB rebranded, renaming its marketing arm ENZA and marketed pipfruit
under the ‘ENZA’ brand name. Prior to this, all export fruit was marketed under the
brand name ‘New Zealand’, the NZAPMB argued that any exporter could use ‘New
Zealand’ so rebranding was necessary (ENZA, 2009). In hindsight the NZAPMB
probably rebranded in anticipation of deregulation and needed to establish an
identifiable brand. During the regulation era the NZAPMB did give out a few export
licenses to exporters whose activities were deemed complementary to its own
(McKenna & Murray, 2002). In 1993 the industry managed to ward off an attempt by
the government to deregulate. As a compromise the local industry was deregulated
opening up the domestic market to any supplier (McKenna & Murray, 2002).
The second half of the decade brought mixed fortunes to the local industry mostly
resulting from events in its macro environment where it had very little control. In 1994,
the Uruguay round of the General Agreements on Trade and Tariffs was signed off; of
key significance to the local industry was the adoption of phytosanitary regulations by
its key destination markets as non-tariff barriers (Le Heron & Roche, 1996). This
resulted in the:
“pests and diseases of pipfruit transforming from an orchard management issue
affecting production to an international competitive threat affecting the consumption
of fruit” (Le Heron & Roche, 1996, p426).
This event coincided with the growing trend of retail consolidation overseas,
particularly in Europe, along with their growing purchasing power. To put this in
perspective, McKenna (1998) reported that the United Kingdom (UK) received between
13
25-30% of all of New Zealand’s exports but just 4 large retail groups control
approximately 61% of all fresh fruit and vegetable sales in the United Kingdom (UK).
To appeal to their more informed, environmentally and health conscious consumer, the
large retail groups expanded their product specifications to include ‘safe fruit’ grown by
sustainable methods, and this they expected at no extra cost. The product specifications
created challenging conditions for the local industry but the NZAPMB was equal to the
task by repositioning itself as an exporter of safe eating fruit, environmentally friendly
and grown by sustainable practices. This development led the NZAPMB to adopt
Integrated Fruit Production (IFP) and promote it to protect its market share. It
encouraged growers by paying premiums on Integrated Fruit Production (IFP) fruit of
$0, 25 cents per carton (McKenna et al., 2001). The system was rapidly adopted by
growers and as of the 2000/1 season, IFP and Organic Production Programmes became
the minimum export standard (Anon, 2002).
Global production of apples grew about 50% between 1992 and 2002. The local
industry faced increased competition from other fruit and manufactured snacks in its
markets. This was worsened by global oversupply of apples, and the increased
bargaining power of supermarkets, all which served to drive prices down (Prasad,
2002). The industry was also vulnerable to extreme weather conditions as hail halved
the export crop in the 1993/4 season (Le Heron & Roche, 1996) and sunburn affected
the crop in 1998 (McKenna & Murray, 2002). Growers endured declining returns
beyond 1995, export revenue fell steadily from the 1995 peak of $482 million to $404
million in 2000 (Dobbs & Rowling, 2006).
The NZAPMB contributed to the challenging conditions for growers by aggressively
employing the clawback system. This was money reclaimed for substandard fruit
reaching the market (quality clawback) or for anticipated prices falling shorter than
initially estimated (market clawback). The NZAPMB paid the growers 50% of the
expected value of their fruit upon delivery, the remaining half was staggered throughout
the year. In 1997, poor quality fruit cost the industry $60 million and Red Delicious
growers were paid $0, 22 per carton after the remainder was clawed back from an
upfront payment of $4, 47 per carton (McKenna, 1998).
14
Despite all these issues the industry was still managed to be considered as the most
competitive exporter in the world from 1996-2000 whilst only producing 1% of global
production (0.5 million tonnes) and contributing to 3% of global trade (McKenna,
2000). This ranking by the World Apple Review uses production efficiency, industry
infrastructure and inputs and financial and market factors to determine the export
competitiveness of producing countries in the long run. The ranking provides an
objective way by which a country can measure its standing against other exporting
nations (Anon, 2009 ).
As can be expected, the decline in returns to growers pushed many to the brink of
financial ruin. This seemed to give the government ammunition to push forth its
deregulation agenda. The decline culminated in the industry’s deregulation on the 1st of
October 2001 (Ministry of Agriculture and Forestry (MAF), 2001). The industry was
opened up to any exporter as of the 2002 season.
Deregulation was pushed forth by the government “to increase the pipfruit industry’s
responsiveness to markets, it’s innovative capacity, and its long-term profitability”
(Redward, 2003, p71). The government believed that multiple exporters could exploit
market opportunities more effectively than the single desk cooperative. As an example,
before deregulation, the NZAPMB signed an exclusive supply deal with the Aldi
Distribution Group in Germany, restricting it from exploiting other opportunities in that
market (Dobbs & Rowling, 2006). The 2002 season saw 97 exporters emerge, most of
them small, with only 35 handling over 100 000 cartons (Redward, 2003).
Upon deregulation ENZA shed all the ‘industry good’ initiatives such as market access,
crop estimates, price forecasts, research and development and contracted them out to
Pipfruit New Zealand Incorporated. Its operations have been funded though a levy
charged on every carton as stipulated by the Commodities Levies Act of 1990. The
growers in particular were soon to experience new challenges brought on by the new
export regime. ENZA no longer guaranteed importing nations that fruit met their
phytosanitary and food safety assurance requirements, thus burdening growers, with an
added cost and inconvenience. The guaranteed price scheme under the ‘single desk’ also
disappeared as well as the advance payment the growers received (Redward, 2003). The
advance payment and price guarantee scheme would have provided much needed
15
financial support because the growers had endured successive seasons of declining
returns.
Mercifully for the local industry in 2002, global prices improved and so did returns to
growers as shown by the increase in the value of exports in figure 2.1 below. The new
export regime explored new and diverse markets essentially restoring confidence in the
sector. The new Jazz™ cultivar developed by HortResearch and controlled by ENZA
performed well in global markets. Orchards in the Hawkes Bay in particular were
expanding with plantings of new premium varieties (Prasad, 2002). 2002 was the first
year the Jazz variety was exported having being a product of the development efforts
that began in the 1980s (Anon, 2005b).
Source: (Statistics New Zealand, 2009) * - forecast
Figure 2.1 – Exports by Volume and Value
Exports grew, though unusually high; 60% of total production was exported in 2002
rising to 63.9% in the 2003 season (Anon, 2009e). The reason for this unusually high
proportion of exports can be traced to the absence of an industry wide export grade
standard that disappeared along with the single desk. Each exporter now determined
their own. This compromised the local industry’s reputation as substandard fruit
reached the market. The exporters also undercut each other in order to get rid of fruit as
16
they acted as commissioned marketers, a development that favoured overseas retailers.
Fruit was shipped at growers risk further compromising their position (Redward, 2003).
Up until 2003, New Zealand had been judged the most competitive apple exporter since
the inception of the ranking in 1996. In 2004, for the first time Chile, New Zealand’s
closest rival, claimed the top spot. This can be attributed to the decline in the market’s
perception of the quality of New Zealand pipfruit, the fragmented marketing approach
of the multiple exporters, and the improvement of Chile’s marketing effort and quality
systems. It seems evident the reputation built by the ‘single desk’ cooperative had
carried the export crop for the first couple of seasons after deregulation. Despite 2004
being a record crop year, losses were incurred as result of poor quality and marketing
indiscipline (Redward, 2004).
The industry’s heavy reliance on the Braeburn and Royal Gala varieties was exposed in
2005 with the firming of the New Zealand dollar against most of the major currencies
(see figure 2.2 below). Global oversupply saw the price of Braeburn fall by 35% and
Royal Gala 12%. This was particularly pronounced in the European market as it was
destination to over 70% of exports. Difficulties for the industry arose from the lack of
market intelligence filtering back to the growers informing them of what the market
wanted. Further difficulties arose from the effects of SmartFresh™, uncoordinated
marketing and poor quality reaching the market (MAF, 2006).
SmartFresh™ is an ethylene inhibiting technology that prolongs the storage life of fruit.
It enables Northern Hemisphere competitors’ fruit to still be present in the market well
after their traditional season ends but also enables the local industry to sell fruit outside
of the traditional window. Counter seasonality presents Southern Hemisphere producers
with a selling window in the north that has been shortened considerably by SmartFresh
(Redward, 2003). The industry continued to struggle as 2006 wasn’t much better as the
New Zealand dollar continued to firm against major currencies (US Dollar, Euro and
GB Pound, see figure 2.2 below) making exports less competitive.
17
Source: (Reserve Bank of New Zealand, 2009) values shown are the average rates over
each year.
Figure 2.2 – The Value of the New Zealand Dollar against Three Major Currencies
The financial hardships forced many growers to exit the industry. Numbers had declined
from about 1500 in 1998 to about 900 in 2005 (Redward, 2003). The exit of growers
from the industry allowed others to consolidate orchards and expand their operations.
There was some vertical integration as growers formed alliances with downstream
businesses like packhouses, coolstores and exporters. Coolstores and packhouses
expanded operations to include food safety assurance and phytosanitary requirements
demanded by destination markets (Redward, 2003).
Over this decade (2000-present) there have been increased plantings of Jazz™ as well
as other recently developed varieties such as Pink Lady™, Tentation™ and the Pacific
series varieties, Pacific Rose™, Pacific Queen™ and Pacific Beauty™. HortResearch
has continued to lead the industry in the development of new varieties with the Jazz™
variety showing the greatest promise. Marketed by ENZA, the owners of its Plant
Variety Rights, 240 000 cartons (4300 tonnes) were exported in 2006 and it had a 65%
price premium on its parents, Braeburn and Royal Gala. It is predicted that by 2010, 54
000 tonnes of Jazz™ will be exported from New Zealand (Anon, 2006). “Similar
volumes were grown under license in France and the United States (Washington State)
enabling the development of year round supplies” (Anon, 2006, p9). Similar trials were
18
held in South Africa, Chile, UK, Italy, and Switzerland and more significantly for the
local industry, Australia (Anon, 2006). New Zealand apples were last allowed into
Australia in 1921 because of fireblight, a bacterial disease affecting apple trees. The
industry has lobbied the New Zealand government which has eagerly taken on their
cause. The local industry argued there’s no scientific justification for the ban and the
matter is still before the World Trade Organisation as of July 2010. Licensed orchards
create a platform to circumvent the ban on New Zealand apples till the matter is
resolved.
In an effort to lessen its reliance on government funding alone, HortResearch sold
services and licensing rights to the private sector to fund its research projects. Prevar®
(deriving its name from ‘Premium Varieties’) is a joint venture company founded in
2004 to manage the commercialisation of new pipfruit varieties. Its founding members
include HortResearch, Pipfruit New Zealand, Apple and Pear Australia Limited (APAL)
and the Associated International Group of Nurseries (AIGN) (Anon, 2009 ). In 2005
Prevar® launched its first cultivars, Sweetie™ a Royal Gala alternative and two pears,
Maxie™ and Crispie™ (Anon, 2005a).
Pipfruit New Zealand has taken the lead to present a more united front for the local
industry. This was motivated by the need to overcome the challenges presented by
global oversupply, a strengthening currency, poor quality exports and the lack of a
robust industry-wide marketing strategy. In 2006, Pipfruit New Zealand set up an export
market panel that would administer the ‘Trustmark’ brand. 90% of the export crop is
now exported under this brand. ‘Trustmark’ is a voluntary export program in which
members upon signing up to, have access to a range of benefits such as access to newly
developed varieties and use of the brand. In return the members agree to adhere to set
down operating guidelines. The ‘Trustmark’ brand assures the market fruit they buy has
been grown by IFP and/or Organic Production methods, grown using “Good
Agricultural Practice, food safety and quality systems compliant with EurepGAP or
equivalent programmes” (Anon, 2009a).
“EurepGAP (now GlobalGAP) is the initiative started in 1997 by retailers belonging
to the Euro-Retailer Working Group, that has since evolved into an equal partnership
between them and produce suppliers. The objective of this organisation is the
19
development of widely accepted standards and procedures for the global certification
of Good Agricultural Practices (GAP) hence the acronym EurepGAP” (Anon,
2009g).
2.3 Current Situation
The 2009 season promises to be a good year given the favourable growing conditions
experienced that have yielded good quality fruit (Anon, 2009b, 2009f). Estimates put
the export crop at around 17.2 million cartons/309 000 tonnes, a 16.5% increase on the
2008 export crop. Pears comprise just 2% of the total export volume comprising
approximately 73% of total production (Anon, 2009f; MAF, 2009a). The balance of
27% is sold domestically or processed (MAF, 2009a). 17 million export cartons is close
to the upper limit of what the growing area in New Zealand is capable of producing, the
lower limit being approximately 14 million cartons, with the weather during the
growing season determining the final output within this range (Anon, 2009b).
Productivity averages out at 54 tonnes per hectare, the highest of any producing
country. Hawkes Bay and the Nelson regions are the main growing areas estimated to
contribute approximately 63% and 30% respectively. Approximately 3% will come
from the Central Otago region while the balance, 4%, will collectively come from the
smaller growing regions of the Waikato, Gisborne and Wairarapa. The export crop is
expected to earn in excess of NZ$500 million in foreign exchange (Anon, 2009f).
The Braeburn and Royal Gala varieties continue to dominate the industry’s exports
though there is a significant increase in recently developed varieties. A 20% drop on the
2008 prices of these two varieties is expected in Europe because growers they have had
an above average season. Optimism, however stems from the gradual replacement of
these varieties by new and higher earning premium varieties as well as the varied
targeted marketing strategies employed by New Zealand exporters (Anon, 2009b). In
2006, Braeburn, and Royal Gala comprised 76% of all exports but this year (2009) they
are down to 64% with increases in the new varieties, Jazz™ up 71%, Pink Lady™ up
15% and Tentation™ up 52% (Anon, 2009f). Asian demand for the Pacific Queen has
been strong as well as other varieties like Kiku, Eny™, PremA193 and PremA17. The
comparatively closer Asian markets are very attractive to New Zealand growers and
exporters because there is security offered by fixed price sales, lower transport costs and
20
quicker time to market than the traditional European and North American markets
(MAF, 2009b).
The local industry’s traditional markets have been the United Kingdom, continental
Europe and the United States though fruit is now marketed in over 60 countries
(Fitzgerald, 2003). The diverse markets give each exporter regardless of size, the
opportunity to formulate strategies to target specific segments of the diverse market.
Collectively as an industry, the risk is lowered as it is spread over wider markets.
In order to develop a sustainable robust marketing strategy for the local industry it is
essential to have the necessary building blocks such as the EurepGAP certification.
Without returning the industry to the regulation era, the set down operating procedures
as well as the fact that over 90% of the export crop is now marketed under the
Trustmark brand brings consistency of quality to the export crop. It also helps in uniting
and restoring trust in the quality of New Zealand pipfruit: and an industry fragmented
by the deregulation process. The trend of late has been for retail groups to establish long
term mutually beneficial relationships with suppliers. Such developments (EurepGAP
certification or equivalent) differentiate and create an opportunity for New Zealand
exporters to acquire preferred status with retailers.
Pipfruit New Zealand has taken a lead role in positioning the industry in the premium
section of the market. The Apple Futures and Organic Production Programmes that are
complementary to the Pipsure Integrated Fruit Production program are two such
initiatives. The Apple Futures project aims to grow apples free of residues. This season
(2009) marked the beginning of the second year and approximately 50% of all growers
in New Zealand have signed up to it. The project shows a lot of promise with half of the
fruit tested in the first year free of residues. In the words of Pipfruit New Zealand’s
CEO Peter Beaven, “the program has made New Zealand’s apples the safest on the
planet” (Beaven, 2008, para 7).
The organic food sector offers plenty of promise for the local industry as Innomarc
Consulting (2006) report that organic food sales in the US and Europe are growing at a
rate of 20% per annum. Last season organic exports averaged out to $36.03 per carton
making them the highest earners with IFP fruit averaging out at $24.62 (Anon, 2008b).
A further 12% of the orchards have signed up to the organic or conversion to organic
21
program (Anon, 2009c). This project has the support of the government that availed $2
million over the duration of the project through New Zealand Trade and Enterprise. The
project is expected to increase the value of exports by $159 million in 5 years (Goff,
2007).
New Zealand has worked hard to preserve its green reputation. To give credibility to its
reputation it has had to ensure it keeps improving its sustainable environmental
practices. In 2007 it was criticised in the United Kingdom for the size of the carbon
footprint of its horticultural products. The government believed the claims linked to
food miles had protectionist motivations. A study carried out by Lincoln University
revealed that the industry had a lower carbon footprint than its UK equivalent. Their
claims were based on food miles and the false assumption that a significant portion of
New Zealand products were airlifted. In truth 99.75% of local products are sea
freighted. The apple industry, as part of the horticultural industry, has benefited from
this kind of research and from the actions of government has confronted these damaging
false claims through public relations firms, the media and Non Governmental
Organisations (Goff, 2007).
In the 2008 season, 93 exporters in New Zealand distributed and marketed the export
crop on behalf of the growers (Anon, 2008c). In the 2009 season, 46 of these exporters
sent their fruit through the Port of Napier Container Terminal.
2.4 Future Developments
The local industry, for the first time, was ranked the third most competitive apple
exporter in the 2009 edition of the World Apple Review (Anon, 2009 ). This is possibly
a reflection of the challenging times the industry has faced dealing with global
oversupply, the commoditisation of the Braeburn and Royal Gala varieties, and the high
New Zealand dollar. The recession is expected to keep prices subdued but the industry
is optimistic it can overcome these challenges. This optimism stems from sales growth
in the Asian markets, now destination to 22, 7% of total exports, the increase of new
varieties in the export mix, the eventual resolution of the ban of New Zealand apples
into Australia, and the continued expansion of licensed orchards overseas.
22
The Asian markets as previously mentioned are comparatively closer than traditional
European and North American markets. There is greater security to exporters as there
are fixed price sales. The faster transit times and lower transport costs enable exporters
to service these markets well, hence the increase in interest by exporters (Anon, 2008a;
MAF, 2009b).
Actual Forecast
Year to 31 December 2006 2007 2008 2009 2010 2011 2012
Export volume (mil
cartons)¹ 14.7 16.3 14.7 17 16 16 16.5
FOB² price ($/carton)³ 22 22.1 28.2 26.9 32.1 33 33.5
Export value ($ mil)³ 323 360 415 457 514 528 553
1. A carton is equivalent to 18.0
kilograms
2. Free on board - the value of goods delivered to the port and loaded onto
the vessel for transportation out of the country of origin
3. Official statistics for FOB price and value modified for 2008 and MAF
Farm Monitoring data indicate higher prices were achieved
Source - (Anon, 2009b, p58)
Table 2.1 – Current and Forecasts of Export Volumes and Value
The increase of new premium varieties in the export mix is expected to continue as new
plantings reach maturity. This trend is reflected in estimates provided by the Ministry of
Agriculture and Forestry (MAF) in table 2.1 above. Looking at forecasts for the next
three seasons, the volumes are consistent but the higher expected earnings stem from
the gradual replacement of the commodity varieties (Anon, 2009b).
The Australian market remains closed to New Zealand apples but the matter is before
the World Trade Organisation disputes tribunal. Biosecurity Australia issued a Final
Import Risk Analysis for Apples from New Zealand in 2006 that recommended
importing New Zealand apples only after they’d gone through stringent phytosanitary
measures to eliminate the risk of fire blight transmission. New Zealand argues these
unjustified measures would add significant cost to the industry (Anon, 2009h). The
23
argument is worth exploring for the local pipfruit industry’s benefit because New
Zealand is best positioned to exploit the Australian market. The fast transit times across
the Tasman Sea and lower distribution costs distinctly advantage the local industry.
The project involving HortResearch, ENZA and licensing overseas orchards further
help differentiate New Zealand pipfruit in the market. Exporters are able to source and
supply fruit all year round to retailers as opposed to just seasonally given the counter
seasonality of the Northern and Southern Hemispheres. It also offers a way of entering
closed markets like the Australian one until the current dispute is resolved at the World
Trade Organisation. HortResearch earns royalties on fruit sold from overseas orchards
thus creating a secondary source to fund the continuing development of new varieties
(Anon, 2005b).
2.5 Summary
This chapter chronicled the history of the New Zealand pipfruit industry from its
humble beginnings in the 19th century to the technically sound, scientific and innovative
industry it is today. The industry’s pursuit of quality and ability to continuously develop
new varieties has positioned it to compete in the premium sector of global markets. This
has been essential in overcoming exhaustive reliance on exports for income considering
its small domestic market, the high transport costs stemming from its remote location,
and high cost of development.
Several key developments over time put the New Zealand pipfruit on the path it is
today. The NZAPMB encouraged growers to focus on higher earning varieties by
deliberately paying more for them in the 1950s. The DSIR’s apple breeding program
was to later produce the commercially successful Braeburn and Royal Gala varieties
that have been the backbone of New Zealand exports since. The decision to sign up to
UPOV in 1981 was to prevent a repeat and subsequent lost of income of any varieties
furthered developed, as what happened with the Braeburn and Royal Gala varieties. The
NZAPMB again encouraged growers to focus on particular varieties in the 1980s, a
development that buoyed export revenue to a peak of NZ$482 million in 1995.
Beyond 1995 export earnings steadily declined due to a combination of factors, the
consolidation of retail groups and their growing purchasing power, global oversupply,
24
and competition from other fruit and manufactured snacks. Retailer demands for safer
fruit increased the complexity for the industry but the NZAPMB was equal to the task
by acquiring 100% conformance from growers adopting either the Integrated Fruit or
Organic Production programs by the 2000/1 season.
The industry was deregulated towards the end of 2001 primarily because the
government felt multiple exporters could exploit market opportunities better than the
single desk could. As of the 2002 season 93 exporters came into operation. The industry
suffered initially because of the fragmented marketing approach of the multiple
exporters. The markets’ view of quality of New Zealand pipfruit was hurt the most as
exporters allowed sub-standard fruit to reach the market. There was price undercutting
amongst the exporters and growers were further exposed to risk by exporters acting as
commissioned marketers.
Pipfruit New Zealand has increasingly taken on the responsibility of reasserting the
industry to its previous status and successfully so. It has managed to get about 90% of
all exporters to join its volunteer export panel ‘Trustmark’. This is targeted at returning
a consistent level of quality to exports as there was prior to deregulation, because each
exporter had their own export standard. Pipfruit New Zealand has also introduced the
Apple Futures program designed to grow fruit with nil residues. This was intended to
create another differentiating point in the industry’s marketing endeavours.
The industry now exports to over 60 countries with increasing replacement of the
Braeburn and Royal Gala varieties by recently developed and higher earning varieties
such as the Jazz™, Pacific series apples, Tentation, Envy™ and Pink Lady™. The
Asian markets continue to grow and increasingly attracting increasing interest from
New Zealand exporters given the proximity compared to traditional European and North
American markets. In the mean time licensed orchards run by the ENZA and
HortResearch offer a way around the current ban on New Zealand apples in Australia.
These licensed orchards in the Northern Hemisphere not only raise funds for continued
research at HortResearch by way of royalties on fruit sold, but they also provide year
round supplies to retailers as opposed to just seasonally. This gives New Zealand
exporters yet another negotiating lever.
25
Chapter 3: Literature review
3.1 Introduction
During the pipfruit export season, the Port of Napier Container Terminal experiences a
surge in reefer (refrigerated containers) cargo, well above the average, between the
months of March and July. As a consequence the terminal endures a shortage of reefer
storage space and an increase in rehandling work during the season. A rehandle is
defined as a container moved from one yard position to another. In other words it is a
‘yard shift’. It becomes necessary to examine the literature as it applies to this situation
to help in situating the research to be carried out. Three sections are presented below in
this regard. The first section briefly explains the different container handling equipment
systems, the second, the literature reviewed on rehandles, and the third, the literature
reviewed on capacity issues in terminals.
3.2 Container Handling Equipment Systems
The availability of storage space influences what equipment a terminal uses. These vary
from one extreme in which containers are stored on trailers (chassis) on sites where
there is ample storage space, to the other extreme where yard cranes are employed to
achieve high density ground stacking where storage space is a premium (Taleb-
Ibrahimi, de Castilho, & Daganzo, 1993).
Source: (Kalmar, 2009)
Figure 3.1 – ‘1 over 2’ Straddle Carriers
26
Terminals not constrained by land use either trailers (chassis) or straddle carriers. In the
former, containers are stored on trailers ensuring that every container is accessible so
there are no rehandles. In straddle systems, containers are stored in vertical stacks and
then laid end to end. These rows are separated by aisles that the straddle carriers travel
in as they ‘straddle’ the containers. In a terminal that stacks to the second tier as shown
in figure 3.1 above, ‘1 over 2’ straddles are employed, meaning a straddle can carry a
container over two containers. In the worst case scenario rehandles are limited to one
container move. Straddles are very flexible as they can be easily manoeuvred to areas of
greatest demand (Alvarez, 2001; Taleb-Ibrahimi et al., 1993).
In land constrained terminals, more intensive use of storage space is required. The most
common systems employ yard cranes particularly in high throughput terminals. These
yard cranes can be either Rubber Tyred Gantry Cranes (RTGs) or Rail Mounted Gantry
Cranes (RMGs). The concept is the same for both; the crane straddles the entire yard
block, including the truck lane as seen in the figure 3.2 below.
Source: (Kim, 1997, p703)
Figure 3.2 – Three Dimensional and Cross Sectional View of a Yard Crane Block
27
The difference arises from the ability of the RMGs to stack higher and the greater
flexibility of the RTGs. The latter can be easily deployed in different blocks whereas the
former are confined to certain blocks given they run over rail tracks. Figure 3.2 also
shows a three dimensional view of the yard crane block showing the bay, row and tier
layout. As yard cranes can access each row from the top, the likelihood of rehandles is
only limited to the number of containers on top of each target container.
Figure 3.3 – Cross Section of a Reachstaker/Forklift bay
The other system making intensive use of scarce land is one that uses
reachstacker/forklift equipment. This is the system employed by the Port of Napier
container terminal. Containers are stacked to the fourth tier though stacking heights vary
by location. The yard blocks are similar to yard crane blocks but differ in the stacking
height. At the Port of Napier, to improve access to each target container, yard blocks
with two-way access are split in the middle (lengthwise) so a bay for each group of
containers is only 3 rows deep as shown in figure 3.3 above (the two colours represent
two different container groups). The group of a container contains its routing details,
including its outbound vessel, port of discharge, the size (20’ or 40’, 8’6” or 9’6”) and
type (reefer or dry) of the container, its weight class (light or heavy) and its
International Maritime Organisation status (type of hazardous cargo if it has any).
Containers are stored by group in the yard. Access is only from the side of a bay so this
system has the greatest likelihood of rehandles.
Reachstackers and forklifts only differ in that reachstackers are able to ‘reach’ over the
first row and pick up a box on the top tier of the second row as shown below in figure
3.4.
Fill direction, middle out
28
Source: (Anon, 2009d)
Figure 3.4 – Reachstacker Retrieving a Container from the Second Row
3.3 Rehandles
As discussed in the previous section, all terminals except those storing containers on
trailers will encounter rehandles (unproductive moves), the severity of which all
depends on the container handling system employed. As terminals handle both exports
and imports, it is imperative to examine how rehandles generated handling exports and
imports are treated in the literature.
3.3.1 Sources of Rehandles
In a study of container terminal operations, Chen (1999) explains how higher stacking
is responsible for unproductive moves (rehandles). The total number of unproductive
moves (rehandles) are dependent upon several factors namely, the storage strategy for
exports, the quality of information on containers, the storage policy of the terminal and
the stacking height of imports.
29
In the ‘pre-marshalling’ strategy exports are ‘dumped’ in temporary stacks using only
one group attribute, commonly the outbound vessel. Once loadlists are finalised, storage
space closer to the vessel berth is allocated and the temporary stacks are sorted (pre-
marshalled) to match the vessel loading sequence. In the ‘sort and store’ strategy, all the
group attributes are used to segregate the container upon receipt ensuring that containers
of the same group are stored in the same stacks. Theoretically there is less rehandling in
this strategy but it demands ample storage space to function effectively otherwise
rehandles arise from the need to sort ‘mixed stacks’.
The second factor influencing rehandles is the quality of information. A container can
have incorrect details such as its vessel or discharge port, consequently needing
rehandles to place it in the right stack. The third factor has to do with the storage policy
employed by the terminal i.e. the dwell time allowed for containers in the yard. The
longer this is, the greater the likelihood of rehandles as storage space is taken up by
boxes that arrive in the terminal well in advance of their vessel working.
In the case of imports, rehandles arise when imports in the yard are moved to make
room for imports due to come off vessels (housekeeping moves). Ideally this is done
before the vessel starts work to avoid slowing down the vessel exchange. Failure to do
so results in new imports stacking over older ones causing more rehandles during
delivery to trucks or rail as the older ones normally go out first. Higher stacking of
imports is considered the most significant influence on rehandles. There’s a greater
likelihood of rehandles the higher the stacks are because the departure of imports is a
random event.
This study is useful to the research project because it helps in understanding what
occurs in the Port of Napier container terminal during the fruit season. The terminal
employs a real time terminal operating system (Navis Express and SPARCS) that
segregates containers according to the ‘sort and store strategy’. Theoretically, a box
should be picked off a truck and taken to its assigned position in the yard and only
moved again when it’s taken under the mobile harbour crane for loading. The large
volumes of reefers encountered and limited storage space force the terminal to employ
the pre-marshalling strategy’ that requires the use of overtime labour (drivers and reefer
care staff) and resources (forklifts) to sort mixed stacks.
30
In a study to quantify the unproductive moves (rehandles) in quay transfer operations,
Chen, Lin and Juang (2000) examined the operations at the Yang Ming Terminal at
Kaohsiung in Taiwan. This terminal uses RTG (Rubber Tyred Gantry) blocks for
transship containers as well as its primary import area, and straddle carrier blocks for
local exports and as its secondary import storage area. Chen et al., identified ‘shift and
housekeeping moves’ as the unproductive moves occurring during loading and
discharge operations respectively. By general and regression analysis of 43 ‘Summary
of Quay Transfer Operations’ and ‘Daily Yard Inventory Reports’ they identified the
number of containers loaded and discharged as the most significant cause of shift and
housekeeping moves respectively. Shift moves comprised 9% in straddle crane blocks
and 17% in RTG of all containers loaded, the difference arising from the higher
stacking achieved in RTG blocks and the change of vessel or discharge port that occur
with transship containers. Housekeeping moves comprised 21% of the total discharged,
a figure influenced by the high stacking achieved in RTG blocks. This supports Chen’s
(1999) suggestion that higher stacking does indeed cause rehandles as there’s a higher
percentage of rehandles in RTG blocks than straddle crane blocks given the former have
higher stacks.
The literature reviewed in this section reveals the main cause of rehandles to be linked
to the shortage of storage space. The increased container volumes terminals deal with
force them to stack higher reducing access to each container and increasing the
likelihood of rehandles. The lack of space forces terminals to employ the pre-
marshalling strategy that generates rehandles to cope with the volumes. The storage
policy of a terminal also influences the number of rehandles as it controls container
dwell times. The more generous this is the more likely rehandles will be as shippers
take advantage of the cheap storage increasing congestion in the yard. Lastly the quality
of information also has an influence on the number of rehandles as any change will
require rehandles to place containers in the right stack.
3.3.2 Rehandling Export Containers
The arrival of exports in the terminal is a random process and because of storage space
constraints, terminals are forced to stack containers of different groups in the same
stacks. It follows that the final layout of exports for a vessel will not suit the loading
31
sequence. It becomes necessary to re-marshall (generating rehandles) the containers to
suit the loading sequence and this is done by allocating space close to where the vessel
will berth to minimise the travel distance of the container handling equipment. The
problem becomes finding the most efficient way of re-marshalling, as it needs to be
done without slowing vessel operations.
Upon confirmation of a vessel’s load list, Kim and Bae (1998) propose a methodology
for re-marshalling export containers in a yard block with two yard cranes. This method
focuses on minimising the travel distance of the yard cranes as well as performing the
re-marshalling process with the least amount of moves. The re-marshalling problem is
addressed in two stages by mathematical programming. In the first stage, the bay
matching and move planning problems are addressed by dynamic programming and the
transportation problem technique respectively. The current stacking layout of exports is
matched to the ideal layout, and then the number of moves required is solved by an
iterative process considering the constraint imposed by the minimum distance allowed
between yard cranes. The second stage, the task sequencing part, then uses these results
to find the sequence that minimises the distance travelled by the yard cranes. The
authors draw attention to the long computational times demanded by this method.
Kang, Oh, Ahn, Ryu and Kim (2006) put forward an approach to solve the problem of
developing an intra-block re-marshalling plan in the least possible time, using multiple
cranes. This approach assumes the vessel loading plan is known prior to sorting, the
objective being to create a re-marshalling plan that generates no rehandles during
sorting and vessel loading, and minimises crane interference. As expected, there are
numerous possible crane schedules so to pick the optimal one the simulated annealing
process is employed to search for good partial orders. These good partial orders are then
expressed in the form of partial order graphs. An evaluation heuristic is then employed
to construct full crane schedules by crane simulation, whose quality is judged by the
length of time taken to complete each schedule. Kang et al., point out that in practice
rehandles are inevitable given storage space constraints and incorrect container weights
given.
Lee and Hsu (2007) propose a integer programming model with constraints reflecting
movement rules containers follow in practice, that seeks to optimise the re-marshalling
32
of exports. The research is based on the sorting of containers in one bay with one yard
crane. In practice moving containers between bays in a block is avoided for safety
reasons, yard trucks are used to perform the horizontal movements. The model is
intended to reposition exports so vessel loading generates no rehandles, and more
importantly, the remarshalling process occurs with the least amount of moves to
minimise the time taken. The model’s computational time is significant so a heuristic is
suggested to simplify the computational process.
In a similar study Lee and Chao (2009) propose a heuristic model to address the re-
marshalling problem. The methodology is less computationally demanding than the
integer programming model proposed by Lee and Hsu (2007). The model sought to
have a final layout that produced little or no rehandles during loading and that required
the least amount of moves during the re-marshalling process. The model had two major
subroutines, the first a neighbourhood search process that seeks to minimise rehandles
in the target bay layout. The second, a binary integer programming formulation, that
reduced the length of the movement sequence. Three minor subroutines worked in the
background to enhance the work of the major subroutines by ensuring at least one stack
was completely emptied, stream lining the movement process and reducing the
rehandles in the final bay layout.
Park, Park and Ryu (2009) propose a cooperative co-evolutionary algorithm to develop
a remarshalling plan for an automated container terminal. Their work is based on a yard
block employing two automated transfer cranes, one that works on the seaside and the
other on the hinterland side. The vessel operations (seaside) and receiving and delivery
(hinterland) operations are kept separate so when time permits, exports stacked on the
hinterland side of the blocks are moved to the seaside and imports from the seaside to
the hinterland side. The problem is subdivided into two parts, the first, target stacks are
chosen heuristically and secondly, specific slots are chosen and the movement sequence
is determined by the cooperative co-evolutionary algorithm. The ideal candidate is one
that eliminates rehandles during the remarshalling and vessel loading operations, and
consumes the least time. Travel distances between yard cranes in different blocks are
kept the same to keep the quay cranes even and minimise vessel turnaround time.
Simulation results showed the plans generated by this method were more efficient than
those generated by algorithms that don’t decompose the problem.
33
Choe, Park, Oh, Kang and Ryu (2009) employ simulated annealing and heuristic
algorithms to propose an intra-block re-marshalling plan that generates no rehandles
during the sorting and vessel loading, and one that minimises yard crane interference in
an automated terminal. The problem is decomposed into two parts, the first identifying
the possible target slots. The second part schedules the yard cranes to move the boxes in
each possible configuration, the ideal one being the one consuming the least time.
This section dealt with the rehandling of exports. What is evident in the literature is that
re-marshalling is standard practice as terminals seek to optimise the use of scarce
storage space. The problem is addressed by focusing on generating yard crane schedules
that minimise the time spent on moving the containers and on producing final bay
layouts that expedite vessel loading. It stands out that the literature reviewed in this
section is all based on high throughput terminals that utilise yard cranes (rail mounted
or rubber tired gantries). A search of the literature revealed very little work on small
terminals, particularly those employing reachstakers/forklifts systems.
It is worth mentioning that re-marshalling is carried out differently in
forklift/reachstacker terminals. As access is only from the side of bays, ideally bays
have to be homogenous unlike straddle or yard crane operations where only the rows
(single stacks) have to be homogenous (as access is from the top). As a result re-
marshalling will be inter-bay and inter-block unlike the research covered here that is
based on intra-bay and inter-bay moves. Despite the difference, the motivations remain
the same.
3.3.3 Rehandling Import Containers
In managing imports there is a trade-off between storage space required and rehandling
work. Theoretically, the more ground space used, the lower the stacks are, and the fewer
the rehandles will be to retrieve target containers. Dichotomously, the higher the stacks,
the less ground space used will be, but the greater the likelihood of rehandles. The
departure of imports is a random event so the greater the access to each import is, the
fewer the rehandles (de Castillo & Daganzo, 1993).
De Castilho and Daganzo (1993) develop a method by which the number of shuffles
(rehandles) can be estimated for one or more target containers. They derive formulas
34
with which they compare two strategies for managing imports. The first is the non-
segregating strategy in which hot imports (older ones) are mixed randomly with cold
imports (new ones). The second is the segregating strategy in which hot and cold
imports are stacked separately. On average, hot imports (older ones) go out the gate
before cold ones (new ones). The adoption of a segregating strategy is a trade off
between shifting moves to clear room for new imports and the benefits of less
rehandling work after the imports land in the yard. It was shown that for lower stacks
(up the third tier) the non-segregating strategy generated less rehandles but for higher
ones (greater than 3 tiers) the segregating strategy worked better.
Kim (1997) proposes a methodology for estimating the number of rehandles required to
reach an import container (target) in one bay in a container terminal yard utilising yard
cranes. Through the use of tables derived from probability calculations, Kim was able to
estimate the number of rehandles required to retrieve a target container. Regression
equations provide a simpler and faster way to estimate the number of rehandles and
provides similar results to those given by the tables. An approximated formula is then
developed to estimate the total number of rehandles required to retrieve every single
container in that bay. This research is significant because of the need to maintain
customer service level as measured by truck turnaround times. Rehandles are a
significant factor influencing the throughput rates of container handling equipment
because there are almost always rehandles when handling imports as their departure is
random. Knowledge of the likely rehandles will help in establishing throughput rates
and what to promise customers, rail and trucking companies in this case.
Kim and Kim (1999) propose a methodology for increasing the level of customer
service, as measured by truck turnaround time, by minimising the number of rehandles
through efficient space allocation. They develop a mathematical programming model
that considers import arrivals in a constant, cyclic and dynamic situation, to estimate the
stacking height that will minimise rehandles. Rehandles lower the efficiencies of yard
cranes and the key to improving customer service levels is minimising them. The
methodology prohibits stacking cold (new) imports over hot (older) ones (segregation
policy), and assumes rehandles are moved within the same bay and that all imports
would have departed before their free storage time expires.
35
The rehandling of imports as it’s addressed in the literature is not directly related to the
research project but it is interesting to note the motivation to solve the problem is
similar to that of export rehandling. The desire to maintain an acceptable level of
customer service to hinterland modes is measured by how quickly trucks and trains can
be serviced in terminals. Rehandles influence this process because they tie up the same
container handling equipment that service hinterland modes. On the export side,
customer service is measured by vessel turnaround times and maintaining them at
acceptable levels is the motivation behind solving the problem associated with
rehandling exports.
3.4 Capacity Issues
3.4.1 Capacity Constraints in Terminals
A report by Broens, van Dyk and Tavasszy (2000) discussed the work done by the
South African Netherlands Transport Forum to optimise the export fruit supply chain
between South Africa and The Netherlands. Logistics and senior management
representing all levels in the export fruit supply chain were interviewed to identify
problems and opportunities to improve the supply chain.
As in New Zealand, the South African fruit industry was regulated, though up until
1997. A similar fragmentation of the fruit industry occurred though in this case, the
problems were worsened by the less developed infrastructure. Problems ranged from
shortages of cooling facilities and refrigerated trucks that affected the quality of fruit,
poor information flows, and the increased complexity of multiple exporters, increased
volumes and congestion in terminals at peak season. At the time of this study, only
about 5% of all the fruit was exported in reefers, the rest was loaded in conventional
reefer vessels. Problems in the terminals arose from the cool stores that were geared for
the previous single exporter, the lack of space and appropriate warehouse management
systems, long wait times and poor information flows that combined to undermine vessel
loading rates. It seems logical the study revealed the need for a supply chain-wide effort
to resolving the problems as it was evident the ports bore the brunt of the problems of
the entire supply chain. These problems point to the lack of collaboration amongst all
stakeholders especially in improving visibility by efficient and effective means of
36
capturing and transmitting operational data. Visibility gives the supply chain the ability
to manage its constrained resources better.
As part of the study reported by Broens et al., (2000), van Dyk and Maspero (2004)
reported on the work done to analyse the entire fruit logistic infrastructure in South
Africa.
“This was motivated by the rising export and production volumes, development of
new markets and the shortage of logistics infrastructure in peak seasons” (van Dyk &
Maspero, 2004, p55).
An audit of the entire logistics infrastructure and its capacity was conducted as best as
possible, in order to quantify shortfalls and recommend appropriate action. It was
concluded that the industry had sufficient capacity to handle the peak periods and what
was needed was to synchronise the actions of all stakeholders in the supply chain to
overcome the problems faced. This study was significant in that it provided empirical
evidence to support the earlier conclusions reached by Broens et al., (2000) that
highlighted that the logistics infrastructure was capable of handling the export volumes.
Maloni and Jackson (2005a) reviewed the literature of the North American port
capacity. They acknowledge the growing capacity problems faced by North American
ports, particularly in the peak season, are not just borne by ports alone but the entire
distribution network. Their work classified the existing literature based on all
stakeholders involved in the container distribution network. They identify operational
stakeholders as landside (shippers, railroads, truck operators and ocean transport
intermediaries like freight forwarders), ports (landlords, terminal operators and labour)
and waterside (shipping lines). They also identify strategic stakeholders as governments
and local communities.
Faced with the ever growing Asian imports, the paper examines how each stakeholder
influences the capacity issues faced by the entire network. The authors point to the
urgency of a network-wide solution in dealing with the capacity issues as container
volumes are projected to keep growing. The ports could help their cause by improving
on productivity as they lag behind the Asian ports as discussed in an earlier paper by
Chen (1998). The scarcity of coastal land leaves three options, that of reclaim,
37
productivity improvements and developing inland hubs to ease the pressure on port
capacity constraints. Given that reclaim and developing inland hubs fall under middle to
long term projects, productivity improvements offer short term improvements.
In a later paper, Maloni and Jackson (2005b) sought to explore the perceptions of port
authorities with regard to the capacity issues they faced. It emerged port authorities felt
hamstrung by the actions of other stakeholders so they expected the situation to worsen.
They cited the lack of collaboration in addressing capacity issues particularly on the
West coast where problems range from congestion on roadways, lack of road and rail
carrier capacity to dealing with community resistance in seeking resource consent for
expansion. Added to this is the unevenness of container flow in peak seasons and
unforeseen events like the weather and labour strikes that temporarily reduce capacity.
Productivity is one capacity driver they felt they had the greatest influence over but
were constrained by the powerful labour unions in North American ports that fiercely
protected the available waterside jobs, working conditions and remuneration. As a
coping mechanism, overtime employment of labour and resources was commonly used
to deal with the volumes. The problems faced ripple through the supply chain as lines
have to re-route containers in transit to avoid the extended delays faced in terminals.
Importers are forced to hold more stock to deal with the variability in supply, at a cost
and ultimately the consumer is worse off.
In their previous paper, Maloni and Jackson (2005b) mention three options available to
ports for addressing some of their issues, reclaim, developing inland hubs and
improving productivity. The port authorities are much in favour of improving
productivity as it offers almost immediate gains. A comparison of container volume
forecasts given by port authorities to forecasts projected from historical volumes
revealed that port authorities under estimated their future volumes. This made it even
more urgent to find sustainable solutions to the problem.
Capacity problems can be addressed by information technology. Murty, Wan, Liu,
Tseng, Leung, Lai and Chiu (2005), report on the work they were involved with in
developing a decision support system for Hong Kong International Terminal’s operating
system, Productivity Plus Program (3P). The Chinese manufacturing boom of the early
1990s saw a significant rise in container volumes that put the terminal under severe
38
pressure to maintain its position as the region’s port of choice. This, coupled with the
scarcity of land in Hong Kong motivated the parent company, Hutchison Port Holdings
to fund this venture with the objective of improving productivity and increasing
capacity.
The authors developed algorithms that enabled the terminal to reduce the number of
internal trucks by half, from 8 to 4 per quay crane. This eased congestion on terminal
roads and made significant savings in vehicle running costs as well as reducing harm on
the environment. They also developed a system for optimal deployment of internal
trucks and yard cranes and anticipating future requirements. A truck appointment
system was set up to minimise rehandling of import containers and policies to manage
demand during the busier daylight hours were adopted when congestion was/is
traditionally an issue. The terminal was able to increase capacity which in 1995 stood at
4 million TEU, to 6 million TEU in 2002. Gains were also recorded in the efficiency of
yard cranes (15-20% increase) as well as the quay cranes (a 45% increase). The
improvements are said to be the same as those the company would have derived from
building a two berth terminal that would have cost US$333 million at a cost of capital
of US$66 million. Some of the changes implemented like pooling of internal trucks as
opposed to assigning them to cranes, have been adopted by rival port companies.
Ortmann, van Vuuren and van Dyk (2006) describe the work done to establish the
volume of fruit the South African logistics infrastructure can handle in a given time
period. Two models were developed, a single commodity graph theoretic model and a
multi-commodity mathematical programming model. The work entailed determining the
capacities of logistics infrastructure like packhouses, coolstores, roads and terminals.
The models were then exposed to two extreme seasonal scenarios assuming there were
no strikes, bad weather or any other events that lower capacity and it was concluded that
the network had sufficient capacity to handle the volumes at peak times. As suggested
by Broens et al., (2000) and van Dyk and Maspero (2004), the authors concluded that it
was suboptimal management and use of facilities that lowered capacity and ultimately
induced congestion in the terminals. They further suggest that greater collaboration in
the supply chain can delay physical expansion in facilities to the long term.
39
Le-Griffin and Murphy (2006) analyse terminal productivity measures at the ports of
Long Beach and Los Angeles, and compare these to other leading ports worldwide.
What stands out is that despite having twice the land area of leading Asian ports (Hong
Kong and Singapore), the latter handle at least thrice the volume of containers (Chen,
1998). This can be explained by site and country specific factors. The Asian ports have
very high land costs so they employ ground stacking in their marshalling yards to make
more intensive use of scarce land. Long Beach and Los Angeles (as do all the other US
ports) have high labour costs so they mostly employ less labour intensive wheeled
operations (trailers). 70% of their volumes are imports making wheeled operations ideal
because rehandles are much less likely than if they employed ground stacking. Safety
laws in the United States prohibit stacking beyond the fourth tier and environmental
regulations and competing urban land uses limit physical expansion. Various measures
have been implemented to confront growing container volumes by some terminals in
these ports given that physical expansion isn’t always possible. Port authorities are
aware of the technologies and operational changes to increase capacity but are
constrained by the reasons stated above. A reduction in dwell time has been used to
increase capacity, the extension of gate operational hours outside of traditional times
and the use of inland terminals to provide the sea terminals with a storage buffer.
The papers reviewed in this section reveal that traditional methods to coping with
increased volumes like expanding existing facilities or constructing green field sites are
no longer sufficient for a number of reasons. The urban waterfront location of most
ports limits physical expansion to expensive reclaim. There are competing urban land-
uses and environmental legislation to overcome that make this option difficult. There is
the realisation that the increased volumes are not just port problems but those of the
entire distribution network affecting all stakeholders. It follows that solutions suggested
point to the need for greater collaboration and visibility for all stakeholders. The
capabilities of all distribution networks need to be known so deficiencies can be
addressed in a timely manner. Ports have been forced to employ different ways of
coping with the increased volumes such as extending gate opening hours, using
information technology to increase operational efficiencies and using inland terminals to
take the pressure off main terminals.
40
3.4.2 Inland/Satellite Terminals
In a preliminary study, Slack (1999) argues for the use of satellite terminals as an option
for confronting the capacity problems freight (rail, sea and air) terminals endure. Hub
terminals have had to deal with increased freight volumes that have put pressure on
them to seek more land for operations. Traditional methods of addressing this problem
like constructing new facilities, expanding existing ones and seeking operational
efficiency improvements are no longer sufficient. This is all a collective result of
tougher environmental legislation that seeks to protect coastal marine habitats,
competing land use in urban areas and increased strength of activism. The capacity
problems spill over to access routes in the form of congestion and related ills like
accidents, noise and air pollution.
Of the four activities that occur in terminals, only the transfer functions need occur in
the terminal. Slack further argues that satellite terminals can take some of the load off
terminals by taking on part of the other three functions namely the storage, container
load consolidation (and the opposite) and the logistics/distribution functions. This
would free up scarce space in the main terminals and theoretically save significant
capital investment. In practice satellite terminals exist though there are some differences
to their benefits. Those created on an ad hoc basis mostly by trucking firms, are not
suitably sited hence most have poor access to terminals. The more successful ones are
those that involve private and public sector efforts as they are suitably sited and are
directly linked to the main terminals by high capacity modes such as rail. Not only do
they relieve the main terminals of congestion but they move freight to more
environmentally friendly modes and help in alleviating traffic problems as well as noise
and air pollution.
Kia, Shayan and Ghotb (2002) employ a statistically based simulation model to
compare two different operating systems in a terminal. Using current data from a
terminal they compare the results for the proposed system with the current one. The
proposed system uses a ‘ship to rail’ system in which imports are loaded directly from
the ship to rail wagons that come alongside, and load exports directly from rail to the
ship. Imports are then railed to a distribution centre inland that also acts as a
consolidation point for exports to be railed into the terminal. The simulation results
41
show that by using the proposed method, it is possible to reduce congestion, container
dwell time as well as ship turnaround time in the terminal.
As part of the INLOC project (Integrating Logistics Centre Networks in the Baltic Sea
Region), Jarzemskis and Vasiliauskas (2007) report on the feasibility study done on the
establishment of a dry port in the Baltic Sea Region, in order to gauge acceptance
amongst transport operators. They argue for dry ports as a way of confronting growing
container volumes and congestion on access routes to terminals. Rail links to the main
terminal ease road congestion as well as extending the hinterland of sea ports beyond
their traditional boundaries. Locating facilities like warehouses and container repair
depots at dry ports allow port companies to offer value adding services to shippers.
Given the environmental and land use conflicts at sea ports that limit physical
expansion, dry ports offer a solution to not only address the capacity problems of sea
ports but can be of strategic importance in widening the hinterland of sea ports beyond
their traditional boundaries.
Roso, Woxenius and Lumsden (2009) extend the dry port concept beyond just an inland
terminal connected by a high capacity mode like rail to the sea port. They introduce the
distant, mid-range and close-range dry ports as options for relieving sea ports of
congestion, moving freight to more environmentally friendly modes (rail), and for
providing logistics solutions to shippers in the hinterland. Distant dry ports link inland
metropolitan areas to sea ports, generating sufficient volumes to justify rail links to sea
ports. Road carriers service these areas over short hauls, delivering and picking up
containers as if they would at a sea port but without the delays stemming from
congestion in sea ports. Shippers are better served and at low cost. Mid and close range
ports act as consolidation points for road and rail modes and have the ability to
assemble trains dedicated to a single vessel. Close range ports, being on the periphery of
cities can assemble trains that are loaded in sequence to vessel loading operations given
that train services prove to be reliable. Some of the functions of sea ports like, customs
X-ray inspections, stuffing and de-stuffing of containers, container repair facilities and
storage of containers can be moved to these dry ports so freeing up scarce space in the
sea terminals. Moving freight to rail also relieves road access ways and terminal gates
of congestion, and reduces noise and air pollution in urban areas. Reliable rail links
enable the sea terminal to use mid and close range ports as extra storage space for
42
containers therefore providing a lower cost solution to terminal expansion given the
difficulty and cost associated with expansion of existing facilities.
The inland port concept offers sea terminals a very novel way of dealing with capacity
problems. Not only do they give ports the ability to free up scarce storage space but they
also can lower distribution and environmental costs by moving freight from road to rail
and by doing so reduce road traffic and any associated problems. Strategically they
extend a port’s hinterland beyond its traditional boundaries by servicing inland
metropolitan areas that would normally have been beyond their sphere of influence. As
for the Port of Napier, the establishment of an inland port would be a cheaper alternative
to reclaiming land from the sea and could be established much sooner than reclaimed
land would.
3.5 Summary
The literature reviewed in this chapter revealed that ports have, and will continue to face
increasing container volumes. In an effort to cope ports have adopted certain strategies
and chief amongst those is higher stacking to accommodate the growing volumes of
containers. Higher stacking however reduces access to each container and increases the
likelihood of rehandles. To maintain acceptable customer service levels as measured by
vessel, truck and train turnaround time, rehandles are a necessary evil. Exports arrive
randomly in terminals so quite likely their final layout is never ideal for vessel loading.
To expedite vessel loading, re-marshalling (generating rehandles) is necessary to match
the loading sequence to minimise the time the vessels are berthed. Rehandles are also
influenced by the quality of information on containers as well the storage policy of each
terminal. As regards to imports, there is a trade off between higher stacking and the
number of rehandles when considering truck and train turnaround times. The lower the
stacks are, the more ground slots used, the lower the likelihood of rehandles but the
greater the number of housekeeping moves of older imports to make room for the new
ones. The higher the stacks are, the less the ground slots used but the higher the
likelihood of rehandles, and the lower the number of housekeeping moves.
The shortage of storage space as well the restrictions on expanding existing sites or
developing new sites has seen the adoption of various coping methods. Options in the
short term provide gains by stacking higher as just mentioned, extending gate hours
43
beyond traditional times and limiting container dwell time thereby increasing capacity
by ‘increasing the velocity’ of containers through the terminals. Middle to long term
options include the use of inland terminals, the more successful ones being those linked
to sea terminals by rail. Information technology provides a way of optimising terminal
operations and consequently increasing capacity. Terminals bear the brunt of
suboptimal decisions upstream so efforts need to be directed at greater collaborative
planning to increase the efficiency of the whole as opposed to localised optimisation.
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Chapter 4: Research Methodology
4.1 INTRODUCTION
This chapter gives an account of the methodological approach adopted in this study. It
begins with a re-statement of the research objectives and a declaration that the
interpretive approach informs the research process. The reasons for the choice of the
case study as the research strategy are given along with a description of the data
collection and analysis methods employed. Issues of validity and reliability are then
discussed in relation to the adoption of the case study method along with the ethical
issues that arose.
4.2 Research Objectives
•Objective 1
To explore the motives behind the actions of the pipfruit exporters.
•Objective 2
To analyse the impact seasonal reefer cargo has on terminal operations.
4.3 Research Paradigms
Kuhn defines a paradigm as “universally recognised scientific achievements that for a
time provide model problems and solutions to a community of practitioners” (Kuhn,
1996, p.x). Collis and Hussey (2003) elaborated on this by suggesting that paradigms
reflect the beliefs and assumptions of a community, so it follows that the conduct of
research, namely it’s design, how the data is collected and analysed, and the reporting
style reflects those beliefs and assumptions.
The conduct of research has two main competing approaches or paradigms, each with
their own distinct view of reality and methods of studying it. There is the older more
established positivist approach that has its roots in the methods of the natural sciences,
and the relatively recent interpretive approach that emerged from the social sciences
(Cohen, Manion, & Morrison, 2000). These approaches in their pure forms sit at the
extreme ends of a continuum where a mix of the two exists in the middle. In reality,
45
research is rarely practiced in such pure forms but as hybrids of these two forms (Collis
& Hussey, 2003).
It would be worth noting at this stage that the positivist and interpretive paradigms are
more commonly known as the quantitative and qualitative paradigms respectively
(Collis & Hussey, 2003). Table 4.1 below shows the various terms used almost
interchangeably in the literature for the two paradigms.
Interpretivist paradigm Qualitative, Subjectivist, Humanistic, Phenomenological
Reflective, Hermeneutic, Ethnographic, Action Research,
Inductive, Critical, Constructivist.
Positivist paradigm
Quantitative, Objectivist, Scientific, Experimentalist,
Traditionalist, Empiricist, Deductive.
Adapted from Collis and Hussey (2003), Creswell (1994) and Veal (2005).
Table 4.1 - Alternative Terms for the Two Main Research Paradigms
Strictly speaking these terms in table 4.1 have slightly different meanings despite being
classified as such (Collis & Hussey, 2003; Veal, 2005). In this research project the
terms ‘positivist and interpretive’ are used to refer to them. This research project is
informed by the interpretive approach. The differences between these two approaches
are well highlighted by examining the ontological, epistemological, axiological,
rhetorical and methodological assumptions underpinning them (Creswell, 1994).
Wight defines ontology “as the science of being or existence” (2006, p20). Oliver
defines it as the “fundamental nature of the world and what it means to exists in that
world” (2008, p24). The distinction between the two approaches lies in how they view
the possible nature of the phenomena to be measured (Oliver, 2008). The positivists
employ a realist ontology that assumes reality is single, hard, tangible and structured,
and exists independent of human awareness of it (Cohen et al., 2000; Oliver, 2008). The
interpretivists employ a nominalist ontology that assumes the reality that should be
studied should be the one consciously created by each individual, a softer one, therefore
46
implying multiple realities (Cohen et al., 2000; Collis & Hussey, 2003; Creswell, 1994;
Oliver, 2008; Veal, 2005).
Epistemology is “the study of the grounds on which we claim to know something about
the world” (Oliver, 2008, p24). Epistemological assumptions “concern the very bases of
knowledge – its nature and forms, how it can be acquired, and how it can be
communicated to other human beings” (Cohen et al., 2000, p6). Collis and Hussey
(2003), and Creswell (1994) suggest that in order for knowledge to be accepted as valid,
the relationship between the researcher and the phenomena under investigation needs to
be defined.
Positivists believe researchers must adopt the observer role to remain objective, and that
only those phenomena that can be measured and observed can be validly regarded as
knowledge. The researcher achieves this objectivity by distancing themselves from the
research process to minimise the possibility of the influence of personal values and bias
(Collis & Hussey, 2003). The assumption that reality exists regardless of human
awareness of it implies the act of investigation has no effect on that reality (Blaxter,
Hughes, & Tight, 2001; Cohen et al., 2000; Collis & Hussey, 2003; Creswell, 1994,
2009; Veal, 2005).
The interpretivists believe that knowledge is personal, subjective and unique and that it
demands close interaction between the researcher and the participants for researchers to
understand the motives behind the participants’ subjective views. In a sense it is an
attempt by the researcher to get inside the mind of subject. The researcher immerses
themselves in the participant’s natural setting and actively seeks to get as close as
possible to the participant, so the act of investigation has an effect on that reality. This is
also known as the anti-positivist view and it entails a rejection of positivist methods
(Cohen et al., 2000; Collis & Hussey, 2003; Creswell, 1994; Veal, 2005).
Axiological assumptions have to do with the role of values in the research and are
dependent upon the epistemology adopted by the researcher. A positivist epistemology
as previously mentioned, stresses objectivity so value statements are excluded from
written reports and impersonal language is used. Arguments are focused on the facts
with little or no regard to context. On the contrary, interpretivists admit to the value-
47
laden nature of the study and bring values and biases to the research. They can also
report in the first person and use personal language (Creswell, 1994).
A distinction can also be made along rhetorical lines. Positivists use impersonal and
formal language that is based on terms that are accepted in the paradigm such as
relationship or comparison. Concepts and variables are well defined from accepted
definitions. The language used in the interpretivist paradigm was deliberately set to be
different from the convention of the positivist tradition. Words such as understanding,
discover and meaning form part of the vocabulary that is personal, informal and based
on definitions unearthed in each study (Creswell, 1994).
The distinctions stemming from the ontological, epistemological, axiological and
rhetorical assumptions make up the two ways of conducting the entire research, they are
the methodological assumptions (Creswell, 1994).
Positivists use a nomothetic methodology which is “an approach characterised by
procedures and methods designed to discover general laws” (Cohen et al., 2000, p7).
The approach uses deductive logic to test theories and hypotheses by statistically
analysing numerical data in cause and effect order (Veal, 2005). Veal defines deductive
logic as “a process based on prior logical reasoning” (2005, p26). A possible
explanation (the hypothesis) is given and then data are collected to negate or support it.
Sample sizes are large to ensure reliability and the results are generalised to wider
populations. The design is static meaning concepts, variables and hypotheses chosen
prior to the study commencing don’t change. The data is collected by instruments such
as experiments, questionnaire based surveys and archival secondary data (Creswell,
1994, 2009; Veal, 2005).
The interpretivist methodology assumes an inductive logic where categories emerge
from the research as opposed to being formed prior to the study. The methodology is
termed idiographic as the emphasis would be on the particular and individual to
understand behaviour (Cohen et al., 2000; Collis & Hussey, 2003). Data collection is
flexible gathered by instruments such as interviews and participant observation unlike
the rigidity and precision required in collecting quantitative data. The data is mostly
qualitative in nature and sample sizes are small but depth is emphasised as data is
collected with the hope of providing rich descriptions of the phenomena under
48
investigation (Veal, 2005). Creswell (2009) suggests that the more open ended the
questioning the better, as it gives the participant the greatest scope to narrate their
situation. “The approach is based on the belief in the value of a full and rounded
understanding of the experiences and situations of a few individuals” (Veal, 2005, p26).
Although it is possible to have representativeness in the samples, there is no claim made
in that respect and results are not normally generalised to the wider population (Veal,
2005). The researcher takes certain steps to improve reliability and validity by using
multiple sources of information (triangulation) and verifying information with research
subjects (Creswell, 1994).
4.4 Methodology
Oliver views methodology as “the theoretical and practical aspects of the conduct of
research” (Oliver, 2008, p103). A more descriptive definition is given as “the overall
approach to the research process, from the theoretical underpinnings to the collection
and analysis of data” (Collis & Hussey, 2003, p55). Cohen et al., (2000) suggest the
interpretive approach to research as being most suited to the case study given its
subjective and interpretive dimensions. This is because it can investigate issues that
numerical analysis cannot adequately uncover. “Contexts are unique and dynamic hence
case studies investigate and report the complex dynamic and unfolding interaction of
events, human relationships and other factors in a unique instance” (Cohen et al., 2000,
p181). Veal (2005) points out that the key feature of the case study is the possibility of a
rich description of the phenomena under study, as the method can involve the collection
of both quantitative and qualitative data using a variety of analytical methods. It is for
these reasons the case study approach is adopted in order to address the objectives of
this study.
4.4.1 The Case Study
According to Collis and Hussey a case study is “an extensive examination of a single
instance of a phenomenon of interest”. The definitions put forth by Cohen et al., (2000)
and Veal (2005) all suggest the pursuit of an in-depth investigation of a phenomenon, or
as Collis and Hussey (2003) put it, of the unit of analysis. Collis and Hussey define the
unit of analysis as “the kind of case to which the variables or phenomena under study
49
and the research problem refer, and about which data is collected and analysed” (2003,
p68).
Yin put forward a more detailed definition for the case study:
“an empirical reality that investigates a contemporary event within its real-life
context, especially when the boundaries between the phenomenon and the context
are not clearly defined” (1994, p13).
The case study is appropriate for this research given seasonality is a contemporary
event, and the boundaries between seasonality (the phenomenon), and the container
terminal operations and exporters (its context) are blurred. As this is an exploratory
study, ‘what’ questions are appropriate (Yin, 1994). All the research questions are
‘what’ questions aimed at providing an understanding of the operations of the exporters,
as well as analysing the impact of seasonal reefer cargo in the terminal. Yin (1994)
further discusses the ability of case studies to accommodate multiple sources of
evidence that help in addressing construct validity.
Case studies can either be single or multiple cases, and can use various data collection
methods such as observations, interviews, archival data or questionnaires, in the same
study and in a triangulating fashion (Collis & Hussey, 2003; Yin, 1994). A single case
study can either be of holistic or embedded design. The former takes a global approach
to analysis while the latter has subunits of analysis within the single case study. This
research project is a single embedded case study given the exporters and terminal
operations are different subunits of analysis within the case study which require the
collection and analysis of qualitative and quantitative data respectively (Yin, 1994).
The findings of case studies are generalised to theories, a method known as analytic
generalisation. Existing theories are used as a basis to compare empirical findings
between cases. Replication is claimed when two or more case studies support the same
theory. There is even greater weight placed on the findings of two or more case studies
that support one theory over a rival theory. This method of generalisation differs from
statistical generalisation employed in positivist methods where inferences are made
about populations from samples, and researchers have access to formulas that determine
the confidence with which generalisations can be made (Yin, 1994).
50
The single case study has a potential pitfall in that the case may not turn out to be what
it was at the start of the research process. The design has to minimise the chances of
misrepresentation and maximise the access needed to gather evidence required. A
potential pitfall with embedded designs is that the focus may shift from the original
phenomenon of interest to its subunits. The analysis of subunits does, however, provide
means for in-depth investigation of the phenomenon of interest (Yin, 1994).
The case study methodology has its weaknesses, Collis and Hussey (2003) point out
getting access to a suitable organisation can be difficult and the research process itself
can be time consuming. It can also be difficult to decide on setting delimits on the study
and it can be problematic to make sense of a contemporary event when one has limited
knowledge of the historical background.
Veal (2005) discusses the merits of the approach, the first being the ability to place the
unit of analysis within its real-life context and being able to treat the subject of study as
a whole rather than isolating variables for investigation. Case studies are able to employ
multiple data collection methods (triangulation) and can use both quantitative and
qualitative data. The single or limited number of cases offers a manageable data
collection task when resources are limited. Case studies permit flexibility in data
collection so the researcher can adapt the research strategy as the research proceeds and
the findings of case studies don’t need to be generalised to wider populations.
As this is an exploratory study of seasonality, it is believed the flexibility of the case
study approach and the tools it has to explore contextual influences justifies its choice
as the research strategy. The data collected was both qualitative and quantitative and the
case study strategy provides the means to analyse both. Another justification is claimed
on the grounds of pragmatism (Veal, 2005). Access to information is made possible by
the Port Company’s close association with exporters in its hinterland and the
researcher’s position as an employee. Seasonality and its dynamics in the terminal have
been of intrinsic interest to the researcher over the last few years particularly in the
researcher’s previous role of Yard Planner. Having experienced and dealt with its
manifestations in the terminal there has always been a long standing curiosity to learn
more about external influences.
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4.5 Research Methods
Blaikie (2000) refers to research methods as the ways in which data is collected and
analysed for the purposes of research. In this research primary data was collected by
semi-structured interviews and was complemented by archival secondary data. The
latter included quantitative data collected from the container terminal database,
qualitative data collected from browsing the websites of the four exporters interviewed,
the New Zealand Shipping Gazette and the Port of Napier’s weekly newsletter. As
suggested by Yin (1994) a case study database was created to store all the data gathered
for the research as part of the effort to address reliability concerns of the case study.
4.5.1 Sampling
“A sample is made up of some members of a population. A population may refer to a
body of people or to any other collection of items under consideration for research
purposes” (Collis & Hussey, 2003, p155). There are two general approaches to
sampling, probability and non-probability methods. Probability samples are used when
representative samples are sought so each member of the population has a known
probability of being included in the sample. Non-probability samples are used when it is
almost impossible to determine an entire population or when no claim for
representativeness is sought (Collis & Hussey, 2003; Oliver, 2008).
As no claim to representativeness was sought in this research, convenience sampling, a
non-probability sampling method was used. Convenience sampling is used when, as the
name suggests, it is convenient because the participants are willing to participate in the
study (Blaxter et al., 2001; Liamputtong, 2009). It was the most practical method at the
time given the time limitations the researcher faced. In terms of generalising,
convenience sampling is the least reliable but a sample can be generated quickly and at
minimal cost (Cavana, Delahaye, & Sekaran, 2001). Interpretative research is concerned
with an in-depth understanding of an issue, so it is reliant on participants to provide rich
descriptions of their circumstances, and as a result it works best with small samples that
may not be representative of a wider population (Liamputtong, 2009).
46 exporters shipped their pipfruit through the Port of Napier in 2009. The top 10
exporters accounted for 47% of the total volume while the balance, 53% was shipped by
52
36 exporters, and most of them shipping small volumes of about 1% of the total volume
or less. 11 exporters were invited by email to partake in the research, five of those were
from the top 10 and the other six were from the bottom 36. Included in the email was a
section briefly introducing the researcher and explaining the nature of the research. The
letter requested an interview with the person in charge of the logistics functions for each
exporter. Please refer to Appendix A for a copy of this email. The researcher did not
hear back from six of them, five replied with four agreeing to participate and one
declining. Incidentally the four exporters who agreed to participate were from the top 10
group of exporters.
4.5.2 Interview
In the case of research, the purposes of the interview are to “obtain information and
understanding of issues relevant to the general aims and specific questions of a research
project” (Gillham, 2000, p2).
Interviews can be used by both positivist and interpretivist approaches to research. The
nature of the questioning and the extent of structure in the questionnaire influence the
inclination to either approach. Straight forward questions that are highly structured such
as those giving participants multiple choice options tend to be used by positivist
methodologies such as surveys. The researcher ‘builds in’ the analysis by giving
respondents specific options as responses. The latter are easily quantified and analysed
statistically as is the norm in positivist methodologies. Semi structured and unstructured
interviews are more likely to be used in the interpretivist approach as their form gives
the participant much greater scope in which to express themselves. Semi structured
interviews follow a preset schedule but are open ended enough to allow the participant
to narrate their story. Unstructured interviews follow no preset schedule and change
between participants as and when it suits (Collis & Hussey, 2003).
Interviews can be conducted in person, between the researcher and a participant, or with
a group of individuals. They can also be conducted over the phone where time and cost
prohibit face to face interviewing (Collis & Hussey, 2003; Gillham, 2000; Liamputtong,
2009). Three ‘one to one’ interviews of the participants were conducted at their places
of work in the Hawkes Bay. The fourth, a ‘one to two’ interview, was conducted over
the phone because the participants were based in Auckland.
53
Research questions 1, 2 and 3 guided the formulation of the interview questions that
were designed to reveal the nature of the operations of the exporters, with an emphasis
on the flow of fruit and information through the supply chain. Please refer to Appendix
B for a copy of the interview questions. The wording of the questions and the order was
varied slightly with each interview but in essence all participants were asked the same
questions. All the interviews were recorded on a digital voice recorder and transcribed
on the same day the interview was conducted. The interview scripts and the voice files
were saved on the researcher’s computer in the case study database. The interviews
were spread over four weeks as the participants were only available at certain times
because the interviews were conducted during the season. The interviews lasted
between 34 and 45 minutes.
The semi-structured interview was chosen because it reflects the interpretivist
assumptions adopted. Liamputtong suggests that “the essence of this method is the
assumption that people have essential and specific knowledge about the social world
that can be articulated by verbal passage” (Liamputtong, 2009, p43). Liamputtong
(2009) further adds that interviews can be a useful tool with which to gather rich
descriptions of the phenomena under study. Blaikie (2000) points out that people love to
be heard, to be paid attention to, and to have their opinions valued so it follows that well
designed interviews can be an invaluable tool for data collection. Any research seeking
to understand humans needs to use interviews.
4.5.3 Archival Searching for Secondary Data
Secondary data are “data that already exist and which are collected for some other
(primary) purpose but which can be used a second time in the current project – the
researcher is the secondary user.” (Veal, 2005, p99). One of the main reasons for the use
of secondary data has to do with time and cost considerations. It is much cheaper to use
secondary data and one can save a significant amount of time than trying to collect
primary data (Blaxter et al., 2001; Veal, 2005).
There are numerous sources of secondary data and they range from companies,
government departments, educational institutions, archival material and the Internet. Of
particular interest are companies that generate two types of data, internal and external
data. Internal data is generated by company record keeping such as sales data,
54
absenteeism, staff turnover or revenue. This information is not easy to acquire and is
often restricted because it is commercially sensitive. External data is found in the public
domain such as the requirement for public companies to publish financial and
ownership structures. Private companies are not obligated to do so and do not normally
divulge such information. Fees may apply to access such information but some may be
available from trade journals, newspapers or databases on the Internet (Veal, 2005).
As an employee of the Port of Napier, the researcher was in the privileged position of
having access to the company data base. The Information Officer was contacted by
email and kindly asked to furnish records pertaining to vessel calls, vessel exchange
lengths, reefer capacity utilisation, reefer dwell times and rehandles for the period
between January 2008 and December 2009. These records were used to address
Research Question 4 which is to find out what happens in the terminal during the
pipfruit export season in the second analysis chapter (Chapter 6). Secondary qualitative
data was retrieved from the websites of the four exporters interviewed, the New Zealand
Shipping Gazette and the Port of Napier weekly newsletter, and combined with the
interviews to present the first analysis chapter (Chapter 5). The data collected was saved
in the case study database on the researcher’s computer.
4.6 Data Analysis
The analysis of data is presented in two chapters to reflect the nature of the
predominantly qualitative data collected from the semi-structured interviews and
archival secondary data retrieved from the exporters’ websites, the New Zealand
Shipping Gazette and the Port of Napier weekly newsletter, and the predominantly
quantitative data retrieved from the container terminal database. Analysis of the
exporters’ data began when the first interview was transcribed. This gave a clearer
picture of what was relevant and allowed the interview questions to be altered slightly
to reflect that process. The analysis of the quantitative data began after all the relevant
data was collected. The data was collected and interpreted subjectively based on the
researcher’s experiences as a curious employee of the Port of Napier, and based on the
influence of the literature review process.
Collis and Hussey (2003) suggest two ways of analysing case study data, the within-
case and cross-case methods. As this research project is a single case study the within-
55
case method was adopted. Analysis of the interview and archival secondary data
collected provided the means with which to build up an in-depth description of
seasonality and identify emerging patterns within. Huberman and Miles (1994) suggest
that description and explanation are the two levels of understanding when analysing
data within a case. The first level, description, is relevant in this case because the type
of research questions asked, ‘what and how’ questions suggest an exploratory nature.
The second level, explanation, applies to ‘why’ questions that seek causality therefore
are not relevant in this situation.
Huberman and Miles (1994) emphasise the importance of displays in analysis. Displays
give the researcher the means to display full data sets in compact form. The data
displays can then be analysed in close proximity with the written text, and should give
the researcher clearer ideas of further analysis. The process is sequential and interactive
and in the words of Huberman and Miles, “displays beget analyses, which then beget
more powerful suggestive displays” (1994, p.433). In this spirit, Research Question 4 is
addressed in this manner. Microsoft Excel was used to depict the effect of seasonal
reefer cargo on specific terminal operations.
4.6.1 Content Analysis
Gillham (2000) considers content analysis as organising the significant parts of
interviews. This organisation is a two part process where the first part entails identifying
the key and substantive points, and the second part, placing these key points into
categories. Categories are simply headings and are the first stage of presenting interview
data. The second part, ‘meaning’ comes from including verbatim from the interview
transcripts and other qualitative sources within the analysis.
The interview transcripts and archival qualitative data were analysed and reduction was
achieved in the manner suggested by Gillham (2000). Analysis began with the
transcription of the first interview, where a copy of the transcript was printed out and
every substantive comment highlighted. Each sentence was considered as the unit of
analysis. The transcript was reviewed again to make sure that those comments
underlined were indeed important, and to include any that may have been missed the
first time. The process was repeated continuously for all the transcripts and qualitative
material retrieved from the archival search.
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The next stage involved assigning a category to each substantive comment consequently
building up an initial list of categories. These categories were further examined,
combining, splitting and re-wording some to ensure the final list was exhaustive and
exclusive, a process that continued as the research proceeded. A table in Excel was
drawn up with the category headings on the top, and the 4 participants running down the
side. Each of the substantive comments were then labelled with the relevant code for
each category, and tallied on the table for a count analysis. The final list of categories
was drawn up, and by cutting and pasting, each substantive comment was placed under
the assigned category. Under each category all the emerging themes were identified, and
for each of those themes, all the exemplar comments were identified to be used in the
analysis. The categories were identified as the supply base, logistics network,
information systems, selling arrangements, shipping matters and looking ahead. These
categories were developed under the guidance of the research objectives and research
questions.
4.7 Validity and Reliability
The quality of research is judged most commonly by how reliable and valid it is.
Blaxter et al., (2001) state that for research to be reliable it has to be conducted in a
manner that another researcher can follow the same procedures and arrive at the same
findings and conclusions. This is known as replication. The rigour and precision
required in positivist studies gives them high reliability, whereas the subjective nature
of interpretivist approaches means that results are likely to be different each time the
research is repeated hence they have lower reliability (Collis & Hussey, 2003).
Veal defines validity as “the extent to which the data collected truly reflects the
phenomenon being studied” (2005, p42). The question that needs to be asked is, “are the
research’s findings an accurate representation of the phenomenon under study?” The
positivist structured approach to research, their objective stance and their non-inclusion
of contextual influences means studies have low validity. The interpretivist focus on
capturing the context of the phenomenon under study to gain a rich and full rounded
understanding makes the studies highly valid (Collis & Hussey, 2003).
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Yin (1994) gives an account of the strategies that can be employed to address the issues
of validity and reliability in case studies. There is a detailed discussion on the three
types of validity namely, construct, internal and external validity as well as reliability.
Since this is an exploratory case study internal validity will not be covered below
because it only applies to explanatory or causal case studies.
Construct validity is concerned with “establishing the correct operational measures for
the concepts being studied” (Yin, 1994, p33). Three tactics can be employed to increase
construct validity namely the use of multiple sources of evidence during data collection,
the establishment of a chain of evidence during data collection and review of the draft
of the case study report. In this case study all three tactics are employed to achieve
construct validity. Semi-structured interviews and archival secondary data are used to
address the objectives of the study. A chain of evidence is established by retaining all
the data collected for the purposes of the case study from interview voice recordings,
transcripts, and the secondary data extracted from the container terminal data base,
exporters’ websites, the New Zealand Shipping Gazette and the Port of Napier weekly
newsletter. Drafts of each chapter were regularly reviewed by the researcher’s
supervisor (Yin, 1994).
External validity is concerned with “establishing a domain to which a study’s findings
can be generalised” (Yin, 1994, p33). In other words, “can the findings of the case be
generalised beyond the immediate case?” Achieving external validity has been difficult
in case studies particularly with single case studies as they have been singled out as
being inadequate for the purposes of generalising. The findings of case studies as
previously mentioned are generalised to theories, analytic generalisation, as opposed to
statistical generalisation used in quantitative studies. Yin recommends the use of
replication logic to achieve external validity in multiple case studies. Achieving external
validity for this case study was difficult given it is a single case study. However the data
collected from the semi structured interviews and the archives can be viewed as
multiple case studies so that lent the case study some ability to address external validity
concerns for that part of the analysis.
Reliability is concerned with “demonstrating that the operations of a study – such as the
data collection procedures, can be repeated with the same results” (Yin, 1994, p33).
58
The emphasis here is on repeating the same study not replicating the results by doing
another case study, to minimise errors and biases. It is acknowledged that interpretive
studies have low reliability given their subjective nature. To increase the reliability of a
case study as many steps as possible are documented and “the research conducted as if
someone were always looking over your shoulder” (Yin, 1994, p37). The two tactics
employed are the establishment of a case study protocol and a database. In this case
study as many procedures as possible, were documented and stored in the case study
database along with all the raw data collected.
4.8 Ethical issues
Research ethics bestow an obligation upon the researcher to behave and conduct
themselves in an appropriate manner when dealing with research subjects to protect
them from any harm. Clear agreements need to be reached with research subjects, and it
is the onus of the researcher to honour those agreements. Blaxter et al., recommend
contracts in this regard. The researcher has to get informed consent from research
subjects and divulge how the analysis of the data gathered will be reported and
disseminated (Blaxter et al., 2001).
All prospective participants were sent an interview request email (Appendix A). The
document briefly introduced the researcher and explained the nature and purpose of the
research. The main aim was to solicit participation from the exporters. The document
explained that the main purpose of the research was for the undertaking of the
researcher’s Masters Degree but some information may be used by the Port of Napier
for their future decision making. It was stressed that participation was entirely voluntary
and that interviews would be recorded by a digital voice recorder. Prior to each
interview each participant was informed they could decline to answer any questions
they were not comfortable with. The prospective participants were informed that only
the researcher’s supervisor and the researcher would have access to the data collected
and that would be securely stored at the university. Complete confidentiality was
guaranteed in the final report.
Prior to the data collection phase, permission was also sought from Chief Operating
Officer and the Container Terminal Manager to gather the required data from the
container terminal database. A copy of the second part of the analysis (Chapter 6) was
59
forwarded to the Container Terminal Manager upon completion and slight adjustments
were made as requested.
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Chapter 5: The Pipfruit Exporters
5.1 Introduction
To restate, the purpose of this research project is to gain a better understanding of
seasonality at the Port of Napier container terminal. Seasonality is evident in the
terminal through its various manifestations but to get an even better understanding of
the process would entail widening the research to involve the pipfruit exporters. The
findings of the research are thus presented in two chapters. This chapter presents the
findings from the analysis of the semi-structured interviews, and the archival search of
the websites of the exporters, the New Zealand Shipping Gazette and the Port of Napier
weekly newsletter. The next chapter presents the analysis of secondary data of various
aspects of the terminal’s operations.
The interview questionnaire (Appendix B) was designed to achieve Objective 1 and
that is to explore the motives behind the exporters’ actions. The findings are presented
under the following 6 categories, supply base, logistics network, information systems,
selling arrangements, shipping matters and looking ahead. Under each category the
themes that emerged from the analysis of the interview scripts are presented under each
category.
5.2 The Supply Base
Owned and Leased Orchards
An investigation of the strategies employed by the exporters to source fruit revealed a
trend towards vertical integration as narrated by the participant, “70 – 80% is our
volume, we are quite vertically integrated there, that through our own and leased
orchards”. Vertical integration is possibly adopted to minimise variability in supply.
This would help in making commitments to customers as well as securing shipping
space with the lines. The guaranteed volume would allow the exporters to make better
forecasts of their outputs and shipping space requirements.
The trend towards vertical integration is further evidenced by exporters investing in new
plantings and partaking in joint ventures to widen their supply base. The participant
explained:
61
“…in the last three years we’ve bought orchards and planted new blocks up,
something like 60 hectares in Hawkes Bay at the end of last season……In Nelson
we’ve got a joint venture out there, there’s something like 150 acres planted up at the
moment. We are just working with other parties as well in joint ventures so there’s a
few different ways we are getting that product”.
This suggests that the exporters want to lessen reliance on third party supplies to make
up their volumes and have more control over their supplies.
As previously discussed in Chapter 2, ENZA has the exclusive varietal and marketing
rights for certain varieties such as Jazz and Envy. The participant mentioned, “….those
are controlled solely by ENZA so that’s another way we can make sure we are getting
the volume by owning the varietal and marketing rights of varieties”. This reveals the
influence of the competitive pressures faced by the exporters in not only obtaining
supplies, but also in establishing a competitive advantage in the market by offering a
unique product. It follows that growers licensed to grow these exclusive varieties have
only one exporter they can forward their fruit to and that’s ENZA, so licensing varieties
would be a sound way of guaranteeing supplies.
One exporter’s business model was initially comparatively lower risk, with minimal
investment in orchards and fruit handling facilities, and was reliant on third party
suppliers. There is evidence today the exporter has become more vertically integrated
with time. The participant said, “we have shares in a packhouse in Nelson. We bought
in two years ago so we could get guaranteed supplies”. This suggests that packhouses
are consolidating points in the supply chain and the exporter chose this as a point of
entry, taking advantage of the relationships the packhouse established with the growers.
The same exporter explained how they later on invested in orchards:
“….they owed so much money in the end they couldn’t keep going financially so we
just stepped in and paid the balance and ended up owning the orchards. So we now
own orchards as well which is quite good because we export all our own fruit, most
of it is early season for Asia so it works quite well”.
The comment above reveals the participant’s enthusiasm at handling their own fruit
particularly for the Asian market. As will be discussed in later sections, the Asian
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market returns are highly dependent upon getting the fruit to the market as quickly as
possible, so the greater control given by handling their own volumes would help in this
regard.
As will be seen in later sections, the exporters have made significant investment in fruit
handling facilities such as packhouses and coolstores. The acquisition and leasing of
orchards provide the guaranteed volume of fruit handled to justify these investments. A
participant revealed, “we have packhouses in the Hawkes Bay and Nelson so we might
as well have a lot of fruit going through so that’s another way of making sure your
throughput is running at maximum potential”.
Contract Suppliers
The balance of the exporters’ supplies comes from contract suppliers at the grower and
packhouse levels. The nature of these associations is fluid-like though as the evidence
will show, the exporters look to establishing long term relationships with contract
suppliers where possible.
The exporters send out personnel to secure fruit off growers in the growing regions, the
process was explained by the participant:
“We’ve got our supply team based in Hawkes Bay, Nelson and Otago. Their main
job is to go and contract fruit off growers. I suppose since deregulation it’s been
quite hard, there are a lot of different options around for growers so you’ve got to go
with a good case you know and some ideas of the returns for the year upfront”.
The competitive nature of acquiring supplies is again highlighted as growers have many
options from the numerous exporters out there. These arrangements are fluid-like
because the growers will go to the exporter that gives them the best returns for their
fruit, as explained by the participant: “I think it is all part of the negotiation that you
have with the growers so if they are not happy with your performance they will leave
you”.
The opposite applies, when growers are happy with the returns they are getting, they
continue their association with the exporter. There is a trend in which exporters have
developed long term relationships with contract suppliers:
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“A lot of the growers come with us year after year. They supply their whole volume
to us and they leave it to us to market their fruit. The same price we pay our own
internal growers gets paid to our contract growers. We see it as an advantage for
them to be with us not a disadvantage, and particularly in Nelson where we need that
extra supply base to fill our contracts with our customers. We need them as much as
they need us so we find it works well”.
An interesting point emerged here that those exporters who have operations in Nelson
are reliant upon third party suppliers in that region. The Hawkes Bay, being the biggest
pipfruit region in the New Zealand appropriately hosts the bulk of the investments of
the exporters. The evidence also suggests a period of learning on the part of the
exporters as it was reported by Redward (2003) that in the period just after deregulation,
many of the exporters’ actions contributed to the financial difficulties experienced by
the growers. Treating the growers fairly would appear to encourage loyalty and would
be one of the reasons many of them return to each exporter every year.
In one instance one exporter managed to take this a step further by implementing
supplier development initiatives. The participant explained: “We have about five
growers who supply their fruit to us that are contracted and we work closely with them,
they have been with us since day one (since deregulation)”. One can only assume they
work closely together on technical matters, as an organisation that intends on retaining
its suppliers for the long term would.
Establishing relationships is not limited to growers alone but to packhouses too. This
participant said:
“We work with selective packhouses that we have good relationships with and sort
of target the variety and size we want….we work out what they’ve got available and
we look at our orders and try and match them up like that”.
The exporter in this instance managed to cultivate the relationship to the level of being
able to fill their orders in the manner explained, as though the packhouses were their
own.
One exporter has a unique way of sourcing fruit in which they manage investments on
behalf of overseas investors. The investors see value in investing in orchards in New
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Zealand, and the expertise of the exporter’s pipfruit growing abilities, so the exporter
manages it for them for a fee. The participant explained the arrangement: “We do a
couple of projects for overseas companies where they purchase the land and we manage
the orchard for them. The fruit comes through us and is packed and shipped and they
receive the revenues”.
5.3 The Logistics Network
Fruit Handling Facilities
The exporters use a combination of their own, leased and contract fruit handling
facilities in the logistics chain. The bulk of the fruit handling is done in their own and
leased facilities as described by the participant: “we have three packhouses here which
we own, we also contract another packhouse to do a bit of packing for the overflow in
the season because there is too much to pack”. The exporters attempt to get the most use
out of their leased and owned facilities before passing on any extra volume to contract
fruit handlers. The contract fruit handlers have to meet the requirements of the same
various compliance programs the exporters have to satisfy. The participant had this to
say, “….we own and lease facilities and also contract, we have partners we use as well,
other packhouses and coolstores and they have to comply with what our requirements
are”. This participant’s website revealed that facilities have to be compliant with
programs such as the British Retail Consortium (BRC), the United States Department of
Agriculture Pipfruit Pre-clearance Program and BioGro for the organic market.
One reason for exporters using their own facilities to handle most of their fruit would be
to retain control over operations. As will be discussed in proceeding sections the sales
of the exporters are largely consignment type sales to the traditional markets of the US,
UK and continental Europe. A more recent trend has been fixed price trading type sales
to Asia, the Middle East and Russia. These sales are highly dependent upon moving the
fruit quickly through the logistics network to the customers as a difference of a week
could see a drop in sale price. The significance of this becomes apparent when an
exporter uses either its own, leased or contract facilities as expressed by the participant:
“We have our coolstores here in Hawkes Bay which is desirable versus using a third
party supplier (contract) where basically the system generally is you go onto a list of
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priority, especially with the Asia side of things with very tight time frames.
Sometimes containers can get missed because you are so far down the priority list
because there are 20 containers ahead of yours. The big advantage with having our
own coolstore is we can set our own priority and reach our goal there”.
The consignment and fixed price sales place different demands on the logistics system.
With consignment sales, knowledge beforehand of what needs to be done gives
exporters the visibility and time to manage the work through the system, whereas fixed
price sales are very much short notice, they test the agility of the system as shipments
are expedited through an already burdened system:
“….particularly with Asia it is kind of a day to day thing, we make a sale today and it
gets loaded the next day just about, whereas with consignments we can see what we
are supposed to do for the whole season so it’s a real mix of pressure at the peak. Just
in the last few weeks all the coolstores have hit peak and they are full and want
orders to clear out, packing is at its peak, it’s crucial to get fruit out to everybody”.
In that respect there are definite advantages to using owned or leased facilities over
contract facilities. All exporters are relatively young given they have been operating
since 2002. It has been a period of learning for most if not all, and it has been about
trying to find the right mix of investing in their own, and using contract facilities. This
is typified by the participant’s comment below:
“We’ve only had our coolstore for this the third season but it has made such huge
changes to our business because we have that instead of knowing that their (third
party) coolstore just couldn’t possibly do that in less than 12 hours notice. We know
we can push that through at our own coolstore that is part of the culture of having our
own coolstore with our own team”.
The exporter has managed to build a competence within the organisation through
learning by doing, pushing the envelope so to speak. To be fair the participant did
mention that for about 90% of the time the contract fruit handlers managed to ship
containers out on time so contractors are important players in the industry.
Whilst still on the subject of organisational learning, there is evidence to suggest that
the exporters have tried to match the volume of fruit with facility requirements. The
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participant explained: “…...we have sold off a couple of facilities that we didn’t utilise
and we’re getting down to a manageable level with the volume we are doing”. It is
understandable that the exporter would want to sell off facilities they were not using and
look to contract fruit handlers to deal with the overflow. There are other reasons as well
for selling off facilities such as financial strife. The industry has had challenges over the
years as the participant explained: “we used to own all of them (coolstores) but 2005
was quite a bad season so we had to sell some of our assets…….we sold them with the
contract to lease them back”. This would have been a strategy to raise funds in difficult
times.
Capacity constraints in facilities are just part of reality for the exporters because of the
large volume of fruit that needs to be handled in such a short period. There have been
issues when large volumes of fruit come of the trees quickly as narrated by the
participant:
“two years ago we had to shut the gatehouse on Good Friday so we said to the
orchards no more fruit till after Easter and kept the packhouse packing right through
Easter………we got the packhouse to pack as much fruit as possible to empty the
coolstore”.
In such instances the system problems are pushed upstream as some of the growers may
not have refrigeration facilities. The shelf life of the fruit is enhanced by cooling it at the
first available opportunity so delays in that respect would compromise fruit quality. The
participant did explain that this was a rare occurrence and that most of the time their
facilities were able to handle the volumes as they came through.
The weather also influences operations in the facilities. Undesirable growing conditions
such as frosts during flowering can delay fruit maturity by weeks. The participant
explained:
“….this season most varieties were behind by two weeks so straight away you are
behind on the game plan on packing and shipping. It takes a while to catch up…it
just delays everything. Sometimes it’s the capacity to get the fruit packed….with the
pressure on with most coolstores when we order product out 99.9% of the time it’s
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able to be done. This season hasn’t been too bad as we’ve got most things done when
we wanted them done”.
Here the pressure stems from promises made to customers overseas with regards to
shipment arrivals as well as booking space with the shipping lines. A delay in maturity
and consequently packing and shipping just means more work would need to be done in
less time. The system gets stressed on the evidence given above, but the work can be
done most of the time. There is not much room for deviations so any disturbance in the
system will just further burden it because of the small time frames the exporters work
with.
The Nelson Region
3 of the 4 exporters interviewed had operations down in the Nelson region. As
previously discussed, compared to the Hawkes Bay region, the exporters have less
invested in orchards and facilities than they do in the Hawkes Bay. As a result they are
more reliant upon third party suppliers of fruit in that part of the country. Most of these
suppliers are vertically integrated albeit on a small scale, they look after all their
activities from picking right through to delivering containers to Port Nelson. The
participant explained the situation:
“In Nelson we have got seven coolstores, a lot of owner operator types operations
down there so they pack fruit, coolstore it and of course do a cheaper FAS (Free-
Along-Side) port rate by doing it themselves. The only thing is the container has to
get to many sites to fill so that becomes complicated. Nelson is a big place and it’s a
long way from the port for some of the suppliers so here in supply group we
coordinate all the packing based on what our customers want”.
The exporters’ sites in the Hawkes Bay are all within a 25km radius from the Port of
Napier. In Nelson some of these owner operators are in places such as Riwaka which is
about 60km away from Port Nelson, Motueka about 50km away and Tasman which is
about 76km away from Port Nelson. Coordinating part container loads with sites so far
away from each other can clearly be a challenge in itself. It becomes even more of a
challenge when trying to expedite shipments through like those of the fixed price sales.
There is less of this in the Hawkes Bay as most of the containers are filled at one site.
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The facilities in Nelson are smaller in comparison, and that presents some challenges as
the participant revealed:
“It’s only now when we hit capacity at all of the coolstores that we try to share the
product between coolstores particularly in Nelson where the coolstores are not quite
as big, and we obviously want to look after the apples. It’s company policy to
minimise handling so we would rather not move fruit between the coolstores because
we’ve hit capacity, we want to put the fruit into a container and send it somewhere”.
The exporter has been forced to move product between coolstores in the past to ensure
all the fruit is in cool storage. Clearly this is not ideal given there is a cost to rehandling
each pallet and the added handling increases the likelihood of physical product damage
and deterioration.
There is, however, a bright side to relying on owner operators in Nelson as mentioned
by the participant:
“….the third party suppliers particularly in Nelson where they pack their own fruit,
they have real ownership because it is their product. They will bend over backwards
to get their fruit loaded in time if we give them late notice to get something on a
ship”.
The greater sense of ownership appears to give the participant a measure of comfort in
knowing that the owner operators will do their best to get the fruit shipped out for late
bookings whilst also looking after the fruit itself. As with all things human, mistakes
tend to be made when work needs to be done in haste but because the owner operators
own the fruit, they will hurry with a much greater measure of care than a contractor who
is alienated from the product, but just providing the fruit handling service.
The capacity of facilities in Nelson is, to some extent, influenced by the frequency of
vessel calls, compared to Napier the fortnightly calls in Nelson have a marked impact.
Given that facilities are smaller in Nelson, they fill up quicker and the situation can be
worsened by the lack of weekly calls. The participant had this to say:
“Probably Nelson is the other quirky thing we have to do because we don’t have
weekly calls all the time there, where as we do here in Napier which is very useful.
So of course when you hit capacity you have to wait 10 days to get the next container
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out which doesn’t help. It’s traditionally always been like that for the time I’ve been
around”.
Evidently this is a problem the exporter knows and has had to live with. At the end of
the day it comes down to storage costs and how dire the lack of storage space is in
coolstores. If it is cheaper to pack the containers and pay the daily storage costs in the
container terminal then that option will be taken. The exporter’s hand may be forced if
they are running out of storage space and have no option but to make room in the
coolstores by forwarding containers early to the port.
Road Carriers and the Terminals
As far as the road carriers are concerned the growers arrange their own transport from
the orchards to the packhouses and coolstores after receiving instruction from the
exporters. The trend is the same among the exporters as far as transporting containers is
concerned. The exporters contract one firm to move their containers to the port and the
third parties arrange their own transport. This was summed up by this participant:
“As far as Nelson is concerned they look after their own again because they are sort
of owner operators, the orchards surround the packhouses and coolstores so they do
their own down there. We negotiate with one supplier for the container transport here
in Hawkes Bay and they service all our coolstore requirements and that has worked
well”.
The exporters are all satisfied with the service provided by the road carriers. Generally
the exporters give the road carriers a schedule of a week in advance with the cut offs
imposed for the different lines they are shipping with. When asked what they thought of
the service provided the road carriers the participant said:
“We are very happy, we’ve never had a shortage of trucks this season so far and they
do long haul for us if we need to go to Tauranga or Auckland…….again I can’t think
of an occasion this season where we’ve been held up because of a lack of transport”.
Like all of the exporters’ service providers, the road carriers also have to comply with
compliance program requirements. The participant had this to say: “…….they have to
comply with our rules, no dirt on trucks etc”. As the exporters outsource services it is up
to them to enforce compliance to ensure service providers remain compliant.
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One of the most frustrating issues for the exporters is the truck turnaround times at the
port and at United Containers Limited (UCL, an empty container depot in Napier). UCL
is an offsite container depot that looks after containers for the shipping lines that don’t
use the Port of Napier empty depot. Delays arise because of two things, the first is the
non-availability of equipment (empty containers), and the second, delays experienced in
dropping off full containers (at the port only) because of the high volume of traffic
within the port during the pipfruit season. Turnaround times of between 1 - 1.5 hours
are acceptable to the exporters but any longer causes problems for them especially with
the cut offs imposed by the shipping lines to have all cargo delivered to the port by.
The frustrations of the lack of equipment (empty containers) were clearly expressed by
one participant:
“The one thing that happens every year, it doesn’t matter who you deal with, is the
shipping lines will always tell you they’ve released containers when they
haven’t…..It’s just part of the issue and that’s why when you get down to the wire
and time is precious, particularly when the port is at peak times, where they (trucks)
are waiting for an hour to get their full container in and to get an empty out we just
run out of time before cut offs”.
To clarify this issue, shipping lines reposition empty containers in Napier (and other
ports) that then have to be serviced to ensure they are in a suitable state to carry
foodstuffs (in the case of pipfruit), and to ensure the refrigeration unit won’t fail in
service. This process takes the best part of a day assuming the container doesn’t need
repairs of any kind, electrical or structural. The shipping lines will issue releases to
shippers (in this case the exporters), against the stock they have at each site. The
problems arise when some containers anticipated to be ready don’t become available,
particularly overnight, and the trucks arrive hoping to pick up an empty. This is when
the delays start and continue until a container becomes available or the truck driver is
instructed to seek another container on a different release. Before that happens, a
sequence of events is triggered that ends in more lost time and is well explained by this
participant:
“He (the truck driver) radios his boss, and the transporter rings the coolstore who
then ring us. We then ring the shipping line who then ring the port to find out what
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the problem is…….you know it’s time consuming. Having a web based system
would be useful, it just eliminates some of the down time”.
The participant further revealed that all the telephone calls made could see another hour
pass before a decision as to what needs to be done is made. This seemingly simple
process appears to be complicated by this ‘red tape’. The participant mentioned that a
web based system would help the exporter in minimising lost time. The Port of Napier
has a web based system in which exporters (and other shippers) can check the status of
releases. The participant acknowledged this below:
“As far as the terminal is concerned Napier port has a really good website. You know
before anyone wastes their time they can check if releases have been officially
released. The likes of UCL don’t have that. It is hard work, there’s a lot of telephone
calling because that is the only way to communicate besides sitting on their doorstep
to get containers. Compared to the port that has longer opening hours, UCL doesn’t
and that can be quite limiting”.
The participant mentioned that if UCL had a web based system then it would simplify
their lives because they could anticipate delays caused by the lack of equipment, and
make alternative arrangements to keep everything moving until containers became
available.
The exporters’ frustrations with the port are not just limited to the lack of equipment
and truck turnaround times but also the gate hours. The comment made by one
participant summed this up, “…we just wish you were like Tauranga and open 24/7”.
The port gate operates between the hours of 0700hrs and 1900hrs in the pipfruit season,
and has a late gate service that runs from 1901hrs till 2300hrs. Shippers, by prior
booking only, are able to bring their containers during this period. The Port of Tauranga
doesn’t have these restrictions primarily because it is a much larger port and has the
volumes to justify operating around the clock.
The exporters appear to be aware of the reasons why the port can’t operate around the
clock judging from the comment made by this participant, “…I don’t think you are ever
going to get that though if it was an earlier start or later finish, even two or three hours
extra in a day makes a big difference”. The port used to shut the gate even later a few
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years ago at 2030hrs but the traffic for the last one and half hour didn’t justify the
labour cost. The late gate service ties in well with the afternoon Receiving and Delivery
(R and D) shift as they have to wait for the late train anyway.
When asked what the port could do better for them the participant replied “….I guess
it’s just flexibility, we’ll always try to be as early as we can but sometimes we just can’t
because fruit is picked and packed right up to the last minute and bad weather can delay
things”.
5.4 Information Systems
Towards Virtual Integration
As the exporters have matured, there has been a visible trend towards full virtual
integration of processes right from the orchards to the end customer. This has been
achieved through the building of customised enterprise-wide information systems, as
well as off-the-shelf versions such as SmartFresh and SAP (System Analysis and
Program Development Enterprise Resource Planning). The participant explained:
“We started with just developing our packhouse system, then the coolstore system,
and then the supply group system like the head office type side which has all the
marketing, invoicing, grower payments, and finance etc….the core of it has pretty
much been there for two years. It took about four years to get the whole thing down.
We also do orchard spray diaries because of withholding periods as we can’t pick
fruit till it’s cleared. There is a huge process from the bin being picked right to the
pallet arriving at the customer. So from the orchard to the packhouse all the data is
integrated”.
There wasn’t much mentioned on teething problems from exporters using customised
enterprise systems but there was a hint of issues from the exporter that used SAP. The
participant said: “when we got it, it was rigid but over the years we pick a different area
to fine tune and we’ve had some pretty good updates on it lately, it is pretty user
friendly now”.
The virtual links are not just within the exporters’ facilities but also with third parties:
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“….we use the likes of Prodoc for putting our CEDOs (Customs Electronic Delivery
Order) through for export documentation. Our system links to all the different
coolstores and packhouses and all the different systems they use. There’s a business
connector there that links all that together”.
The virtual links provide a cost effective way of transmitting information both ways
along the supply chain. The systems have been developed in such a way as to automate
a lot of the previously manual processes of documentation. This has squeezed time out
of the system and complimented the marketing efforts of the exporters where they need
to get fruit to the market in the shortest possible time.
Bar codes are in widespread use, and assist in transmitting data seamlessly and
eliminate duplication of data entry tasks in the supply chain. For example, the
participant said “it’s all bar coded, it has all the spray diary information for each block
submitted into our computer systems”. This helps the exporters in managing the
complexities of government, industry and retailer compliance as well as the required
documentation trail. The participant described the process:
“So our software has the ability to go right when we pack this particular customer’s
fruit these suppliers (growers) cannot be packed for it so no human being has to
remember that…..It (the system) does that for you…it traps all the compliance issues
throughout the system”.
The exporter went on to explain how the system helps in fulfilling traceability
requirements of the retailers. With just a bar code the exporter can look to see who
exactly grew the fruit, what sprays were used, what orchard it come out of, how it was
treated, as well as who packed it and what pallet the carton of fruit was on. Barcodes
minimise errors arising through transmission of data and are complemented by the
widespread use of EDI (Electronic Data Interchange) which is appropriate given the
supply chains span continents.
“We use the EDI system and (name given) will send the loadout to the packhouses
from our SmartFresh system which quite a few exporters use……………I get the
EDI file from the packhouses and pull it into our system…we are quite dependant on
the EDI”.
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The systems developed give the exporters visibility within their own systems,
particularly in their facilities where most of the physical handling occurs. The
participant had this to say:
“There is good software to find the product within the stores, things don’t get lost in
the process, we have got fruit that is literally packed today and is shipped the next
day. You know you can prioritise that through our coolstores, it gets into the forced
draught cooler, it gets cold quickly, it’s prioritised and the coolstore can easily see
their data”.
The participant gave a hint of past issues arising from fruit ‘being lost in the system’,
and how their Warehouse Management System (WMS) has managed to minimise that
problem. The ability of the system to expedite particular product through complements
the nature of the fixed price sales as discussed previously. The short time frames the
exporters have to work with when servicing the fixed price trade are highly dependent
upon trusting the system to move the right product through the system quickly.
The Internet
As discussed previously, the exporters and other shippers have to work to shipping line
imposed cut offs. They have to get all their documentation done and cargo in the
terminal by a certain date and time, prior to a vessel arriving and working. The
exporters log onto the port’s website to check vessel estimated time of arrivals (ETAs)
as they change because of a number of reasons such as industrial action, bad weather or
port congestion at upstream ports. The participant explained:
“The port’s website is very good, we can see exactly when a ship is coming in and
we can go back to the shipping line and say it looks like this vessel has been delayed,
can we have a later cut-off? I’m on that everyday checking it in that way”.
This is again a reflection of the tight time frames the exporters are working under. An
awareness of vessel ETAs helps the exporters to manage and adjust their workloads if
need be. There also is the issue of CEDOs (Customs Export Delivery Order). All
exporters have to lodge CEDOs (Customs Export Delivery Order) for all export
shipments with New Zealand Customs. Shipments that don’t have CEDOs cannot be
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exported under New Zealand law. The participant further mentioned that they used the
port website to check if all CEDOs for their containers were clear.
As previously mentioned, the exporters also check the status of empty releases on the
port website prior to sending a truck out to fetch it. The participant reasoned, “…you
know that if it has been released on the website your chances of picking up an empty
have increased”.
The exporters also get vessel schedules by email from the lines and go onto their
websites too. The port website does offer them answers to most of their questions
without the need the pick up the phone to talk to someone. The need to make phone
calls arises when exporters give their road carriers the wrong documentation and need to
liaise with the port gate staff to address the problem.
Communication with Stakeholders
The discussion in section 5.3 revealed that the exporters were generally happy with the
service given to them by the road carriers. The road carriers have provided adequate
vehicles for the work required to be done, and were getting advanced notice of about a
week for the work to be done. The participant mentioned that communication with the
road carriers has traditionally been via phone and radio transmission (RT). That has
evolved as described by the participant: “…with our system we’ve designed an extract
that can be pulled out and emailed to them (road carriers), so they see all the
information for deliveries they need to make of a day or a week”. The nature of the
release numbers makes this clear. They can take such forms as 170002385083, or
AKLUPKG01007891 or 587309256. It is easy to understand that trying to pass them on
over the phone could possibly result in transposition or missed figures. As these release
numbers have to be in the exact order when they are quoted to the gate staff at the port
or UCL, transposition or numbers missing can result in delays.
The participant further explained: “….it’s all done electronically so it’s not re-entered at
any point….I think with all the transporters we’ve used previously there have always
been issues with communicating the right information”.
Communication with the shipping lines occurs at two levels. Section 5.6 will discuss the
first of the two levels and that involves the exporters giving the lines forecasts of their
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expected shipments. The second level occurs on a more day to day basis during the
season; the participant explained, “I’m on the phone to most of their sales people and
managers a couple of times a week to have a chat and make updates. It’s pretty good
really”. This involves resolving day to day issues as they arise.
One exporter has taken this a step further by fortunate circumstances, the participant
revealed:
“We are in a fortunate position that the company that own us also own a logistics
company so we have an in-house agent from our sister company who works in our
office and works directly with all the shipping lines we deal with”.
The agent’s experience, knowledge and contacts have helped to create what the
participant called seamless communication with the shipping lines so all they do is pass
on what needs to be shipped to the agent and the agent finds the shipping space.
Communication with customers is mainly by email/EDI. The exporters keep the
customers up to date with the status of shipments, the participant said:
“…from my side we have fortnightly updates going out saying what is happening
over the next fortnight. When orders are done they are getting emails stating what the
orders are and what needs to be done, all the cut off times…etc”.
Shipping is prone to delays so keeping the customers informed allows them to make
adjustments if and when shipments are delayed. The participant further added that
consignment customers are also prompted on pending orders, chasing the necessary
documentation and making sure everything is running as planned.
5.5 Selling Arrangements
Consignment Sales
Consignment sales constitute the bulk of the exporters’ sales, and these are largely to
the traditional markets of the US, UK and continental Europe. The participant described
the nature of these sales:
“Our large consignment customers are in the US, Europe and the UK……the
consignment sales are the bulk of our product, probably about three quarters of our
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supplies are for consignment sales. We have a pre-program at the beginning of the
season and we negotiate the volume they want of certain products and we stick to
that”.
Prior to entering negotiations with retailers such as Sainsbury and Tesco in the UK, the
exporters get estimates of the volumes they expect from the harvests and promise to
deliver a certain amount. They are able to adjust those volumes closer to the time of
delivery depending on what their final output is. The participant said: “we don’t know
exactly how that looks (output) until we get to packing during the first few weeks of a
variety. Once that is underway we can then reforecast our productions and adjust our
programs with our customers”.
These arrangements give the exporters a measure of stability because of the visibility
afforded by knowing what needs to be done ahead of time. One participant even
mentioned that “….they take all our fruit….for a few customers we actually can’t fill
their requirements”. This hints to the potential to send more fruit provided the price is
right. Prices in consignment markets change a lot because they are quoted in foreign
currencies. It is quite possible for currencies to shift during transit, and the exporters can
find that fruit is worth less than it did when it left New Zealand’s shores.
One exporter, in an effort to gain some measure of protection against currency
movements got some retailers to agree on a minimum price, the participant said:
“….this year because last year was so shocking we got them to agree on a minimum
price which they don’t normally like doing”. The power does lie with these retailers and
the quality of New Zealand fruit is just about the exporters’ only bargaining tool.
Fixed Price Sales
The balance of the exporters’ fruit is sold on fixed price to the relatively newer markets
of Asia, the Middle East and Russia. The nature of these sales was summed up by this
participant: “….we also have a huge volume of customers in the rest of the world which
is mainly Asia and Middle East where they are more trading type sales. We give them a
price of a week and send it the next week”.
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These markets have several attractions to the exporters aside from the fixed price such
as the shorter transit times to the markets and the upfront payments received. The
participant explained:
“In recent years it’s become a trend into Asia because the money is a lot better and
the transit times are shorter, it’s just of a lot more benefit to go straight into Asia than
spending five weeks shipping into Europe to find the exchange rate and price has
changed. So Asia has been a big target for us, about 40% of our fruit is exported
there. We’d like it to be a bit bigger but there are other challenges there like the
Chilean fruit that comes in there as well but it is a big focus for us”.
Operationally these trading type sales present different challenges to the logistics
system because of the tight time frames imposed by changing weekly prices in the
markets. The participant explained:
“Some of our Asia business we do….you got to get in there first. The early
shipments get the best money so it’s just about getting it off the trees and through the
packhouses and back down to temperature as quickly as possible. Some weeks we
are picking on a Tuesday and Wednesday, packing on Thursday and cooling the fruit
on Thursday night and back to the port on Friday before the cut-off”.
Shipments need to be expedited through the system amid other shipments going out to
consignment customers. There is less visibility for these types of sales because of the
short periods of notice, and success depends on how quickly the system can move the
fruit through and get it to the market.
Compliance
The different markets and customers the exporters deal with impose several standards
they have to adhere to such as how the fruit is grown, treated and handled. As
previously discussed in the logistics network section, some of the requirements are at
the facility level. A significant program is run by the New Zealand government through
New Zealand Customs, acting as a facilitator for exporter operations. In response to
heightened security issues since 9/11, New Zealand Customs established the Secure
Exports Scheme (SES) to act as a guarantor that shipments are not likely to be used for
terrorist activities. As a result shipments are less prone to delays at ports of entry
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minimising any potential associated costs of delays. The participant had this to say
when asked about compliance issues:
“Yes we got people here to monitor and help people through like the SES with
customs. We are accredited to that so we have to make sure our business partners are
up to specification on that also, trucking companies, the whole works, everyone is
required to be compliant to our requirements and our offshore customer
requirements”.
The other compliance programs are at the orchard level where growers can be
accredited to a wide range of programs such as IFP, Tesco’s Nature’s Choice, BioGro
and Apple Futures. Programs like Tesco’s Nature’s Choice are retailer minimum
requirements in their quest to provide their customers with safe fruit grown from
sustainable practices, and those like IFP and Apple Futures are designed to give New
Zealand fruit a competitive advantage in the market whilst also addressing food safety
and environmental concerns of consumers.
The different retail customers have their own standards that the exporters have to adhere
to and the complexities that come with that. The participant explained:
“ …when a consignment of fruit from a supplier arrives, a portion goes to the US, a
portion to Asia and a portion to Europe…..not only do they need to be handled and
treated differently but they also have different packaging types and branding so it
gets complicated without going into too much detail”.
The participant further added:
“The Europe stuff is all part of GlobalGap now (previously EurepGAP), British
Retail Consortium is another whole set of standards, Tesco has ‘Nature’s
Choice’…another whole set of standards…it goes on and on….there’s a lot of
paperwork but you can’t send your fruit to all those markets and expect not to have
all the standards in place. GlobalGap is good because it’s kind of standardised the
whole of Europe but you do get customers that require extra things”.
The enterprise systems used by the exporters help to manage the administration side of
compliance. The participant did mention that a lot of the programs were similar and that
there was a lot of overlap. Clearly compliance is an important aspect of the exporters’
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operations: “….compliance is a huge area. We literally have a few dedicated people
within the company that look after that”.
Licensed Overseas Orchards
As discussed in Chapter 2, ENZA found a novel way of overcoming the ban on New
Zealand apples in Australia by establishing licensed orchards in Australia to grow
varieties such as Jazz™. The participant enthusiastically exclaimed when asked about
Australia as a market: “…we are already in there! We are selling Jazz over there, Pacific
Rose as well. We are selling it in the supermarkets over there now”. The participant
further added that the fruit grown in these licensed orchards is grown to the same
specifications as fruit grown here in New Zealand, and they monitor orchards to ensure
adherence to prescribed standards.
ENZA has these arrangements in 12 other countries in both hemispheres, the participant
elaborated:
“….we grow varieties around the world and one good thing is keeping a 12 month
shelf space up. When New Zealand’s season ends you come into to other countries’
crops when their season comes along. When our Jazz runs out on our shelves here we
bring some from the US so it’s all fresh products all year round”.
There are barriers to entry with this strategy and that is the exclusivity of the varieties
and the financial resources required to undertake such ventures. That aside, there should
be less reliance on keeping fruit in cool storage for extended periods in order to keep
selling out of season.
Exporter Alliances
The exporters appear to exploit the competences ENZA developed from the regulation
days as the NZAPMB to establish alliances to market fruit. One participant mentioned:
“…..we have a partnership with ENZA ourselves, they have a very good sales team
particularly in the US and Europe so we send a lot of our product via them because
they have the best customers to sell their fruit to get the best price so we actually
work with them a lot”.
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These good customers come through the distribution channels ENZA has bought into
hence guaranteeing channels other New Zealand exporters can use if they enter into
marketing agreements with them. According to ENZA’s website they have a 50% stake
in Worldwide Fruit who are major importers of fruit in the UK. They have a 15% stake
in Oppenheimer in the US who has been selling fruit for about 150 years, and their own
company Delica operates in Asia on their behalf.
It would appear that these kinds of alliances are commonplace in the industry, granted
the greater volumes give exporters more leverage when negotiating for shipping space
or with retailers. A participant mentioned “there are a few large grower-packers that we
do that with….most of them help each other out, we are quite happy to talk to people
(exporters), there’s got to be a mutual benefit”.
5.6 Shipping Matters
Vessel Schedules and Shipping Space
In an article in the New Zealand Shipping Gazette, the chairman of the New Zealand
Shippers Council voiced exporters’ concerns over the limited capacity going out of New
Zealand. This was because the shipping lines have managed to achieve their goal of
getting their vessels to arrive and leave New Zealand full, but much to the detriment of
all exporters:
“…….but that puts immense pressure on shippers’ supply chains………Shippers are
often held to allocation by the carriers as they have no space to carry any extra
cargoes. Also, if we miss a sailing due to production, letter of credit issues, etc, we
often have to wait two to four weeks to get alternative space as lines are simply full”.
The actions of the shipping lines are understandable given the recent global financial
crisis but that has made for some challenging conditions for the exporters. The
reduction in available slots on routes has come about as the shipping lines have
rationalised their operations. Lines in recent times, have been entering lines entering
vessel sharing agreements on routes they previously had their own stand alone services,
the participant revealed:
“When I first started we used to have so many options it was really good….for
example for the European service Hapag Lloyd had their own service that went via
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Singapore, it was brilliant, and it worked really well! Of course they pulled out that
service, it doesn’t really help us, and it just takes away your options”.
Another example from 2009 was the termination Hamburg Sud’s ANZL service it had
with Hapag Lloyd as a slot charterer. They both joined COSCo’s (China Ocean
Shipping Company) ICS service that already had COSCo, Maersk, MOL (Mitsui O.S.K.
Lines) and NYK (Nippon Yusen Kaisha).
Transit times are evidently a cause for concern for the exporters as they have noticed
them extending in recent times as expressed by this participant:
“…transit times to the East Coast of the US went from a 3 week to a 4 week service.
Europe used to be 36 days but is now 42 days. I suppose a lot of that is in
connections too with transhipping at Tanjung Pelepas, Singapore and where ever”.
This in recent times can be attributed to slow steaming adopted by most lines as they
look to save on fuel costs. Another reason for the extended transit times can be
attributed to the shipping lines’ switching from direct to relay operations. A direct
service is one in which a container stays on the same vessel from port of loading to the
port of discharge. A relay service involves transshipping, so a box will be transferred to
another vessel before arriving at its final destination. An article from the New Shipping
Gazette reported that just one line CMA CGM, has a direct service to Europe from New
Zealand, whereas just a few years ago there were six different options for shippers.
Even here in New Zealand time is lost with the feeder services. “You could lose 6 days
getting your container out of the country via feeder services. It is tough but what can
one do?” Judging from that comment made by the participant the exporters are fully
aware of the time lost due to transshipping and would have to factor that in when
making commitments to customers.
The lack of shipping space was highlighted by one participant:
“We’d probably want bigger vessels north-bound (from New Zealand) but the
problem with Nelson is you are always going to have a draft issue and they are not
going to dredge the port because it’s too expensive. Another thing is these vessels are
not full south-bound (to New Zealand)”.
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It is understandable that Port Nelson would only invest money in dredging their
channels if the volume of business was there to justify the cost. It’s not just Port Nelson
but the Port of Napier as well that has to contend with this issue. The vessels calling to
New Zealand ports will get larger going forward, and they will require deeper channels
so it is an issue for both ports to consider.
Compared to Nelson, Napier has more weekly services calling primarily because Napier
has a bigger port handling more than double the volume of containers. The fortnightly
calls in Nelson present some unique challenges to fruit handling as explained by the
participant:
“….we are restricted by what we can do physically….we are pretty much stuck with
having to work everything to their fortnightly calls instead of being able to work to a
nice regular weekly program. We have to do very little in one week and then push 70
to 80 boxes through the next week. It makes it very hard for the packhouses”.
The problem is exacerbated by the comparatively smaller facilities in the Nelson region
so capacity shortages arise in facilities with fruit having to be moved between coolstores
to get it all into cool storage.
Port Nelson is also vulnerable to being dropped in vessel rotations whenever shipping
lines need to get vessels back on schedule. This negates the marketing efforts of the
exporters as shipments are delayed. The participant explained: “I think the only issue
with COSCo is that on the COSCo-Hamburg Sud Asian service, vessels can run late and
if they drop a port it’s usually Nelson”. The participant further explained that when
faced with this situation they are forced to use other options with transit times that are
not ideal for their marketing plans.
The exporters select carriers on the basis of the overseas ports they call at and the transit
times to get to those ports. They use a variety of services offered by the different lines
as explained by the participant:
“…..there are some pretty fast services, you just got to look at each line, different
lines specialise in different markets….MSC (Mediterranean Shipping Company)
might get to Taiwan faster so you use that, or OOCL (Orient Overseas Container
Line) might get to Hong Kong faster so you use that, you just mix and match”.
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One participant expressed some frustrations at having to work around the shipping
lines’ schedules, “shipping dictates our marketing at the moment which is not ideal”.
The participant further added:
“…..we sometimes have to use Maersk to get to Indonesia or Thailand…. their
transit times are longer than PIL (Pacific International Lines) and MISC (Malaysian
International Shipping Corporation). It doesn’t always fit in with our marketing plan
like to get fruit up there as quickly as possible to get the best price”.
The exporters showed an awareness of New Zealand’s uniqueness in the shipping world
with regards to its highly seasonal demand for reefers. There is an imbalance because a
lower number of laden reefers are imported than the much higher number of laden
reefers exported. The shipping lines would rather bring in laden reefers to be used by
pipfruit exporters than repositioning empty reefers because they don’t get paid for
moving empty reefers. Unfortunately they don’t have the business to bring in an
adequate number of laden reefers to fulfil the exporters’ requirements so they have to
reposition empties to make up for the shortfall. The participant reasoned and explained:
“…they (shipping lines) are in a hard place where New Zealand exports a lot more
reefers than we import so they have to bring in reefers but we have started doing
programs with the shipping lines. We say we are going to export five reefers a week
with you, with the next shipping line eight etc…..so they know what they are going
to receive from us and we expect that service back. If we said we are doing to do five
per week we expect the equipment and space from them”.
The shipping lines appear to get the exporters to submit forecasts of their shipping space
requirements to allow them to make better decisions on determining the empties to
reposition to New Zealand, and to know what size vessels to deploy. The participant
acknowledged this by saying: “Well it benefits us both especially that they know we hit
our targets which is usually 99.9% of the time, and we get looked after the other end
like if they are running tight on space they’ll look after us too”.
The same participant does hint at the lines according preferential status to big volume
shippers: “Everyone keeps talking about things (shipping space) being tight in New
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Zealand, I suppose if you are going to hit your volumes you are going to get looked
after (by the lines)”.
It would seem the establishment and maintenance of good relationships with the lines is
essential when confronting tight shipping space. The participant stressed, “…we have to
be really careful we maintain good relations with everyone (the lines) because we
always have to call in favours at the last minute”. It would be fair to assume that this
wouldn’t be just limited to shipping space and equipment but to cargo cut offs and late
bookings as well.
Overall it seems the exporters are happy with the service the lines give them despite the
challenges they face. The participant expressed some of these challenges:
“….this year Swires pulled a couple of their Napier calls. We were quite excited by
them because they have got some really good transit times to Taiwan so now we
have fewer options to try and get the fruit there. Generally most are reliable, HSD
have had a bit of trouble this year with their squash and apple vessels, they kept
coming in late which means planning gets pushed out and fruit age becomes a
problem”.
Despite the challenges, the exporters have shown that they can cope with the services
provided by the shipping lines. The relationships between the exporters and the lines
appear to have been strengthened by both sides collaborating on issues such as shipping
space and making alternate arrangements when vessels omit certain ports like Nelson.
The perception that the lines are reliable would have been reinforced by actions like the
one Maersk took as narrated by this participant:
“Most are reliable and for example Maersk when something goes wrong they tend to
come up with a really good solution. Once their peak season loader had to omit
Nelson and they ended up telling all shippers they would send in another vessel to
pick up their cargo to meet the peak season loader in Auckland”.
Maersk were recently reported in the New Zealand Shipping Gazette as having launched
the ‘Priority Product Upgrade’ in which shippers, for a fee, can get loading priority at
the time of booking. The New Zealand Manager for Maersk said “where demand for
space exceeds supply, this service will allow customers for whom time is of essence to
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obtain space on a particular vessel”. This has been touted as a way for shippers to gain
more control over their supply chain and for Maersk to build relationships with its
customers. In a marketing sense Maersk are taking advantage of the high demand to
discriminate the market and offer a product to shippers who are unwilling to wait.
Equipment Availability
A source of frustration for the exporters is the non-availability of equipment (empty
reefers). The time lost in addressing problems of equipment non-availability quickly
mount. It becomes more than just lost time when it affects late bookings for the fixed
price trade:
“….there is always something to hold up the process particularly with the hand to
mouth trading with Asia. There’s a big difference in the return to the grower if it
arrives this week as opposed to next week so if there’s a sale we’ll push to get it on
this week’s vessel because a difference of a week can be about US$2 /3 per carton so
it’s worth trying to push”.
So what could be just an hour delay could easily turn into a missed cut off for a late
booking and a missed opportunity to retain that US$2/3 per carton. There is an
awareness of the source of this problem with non-availability of boxes. One participant
commented on a recent vessel exchange witnessed in Nelson:
“At the beginning of the season I was in Nelson and saw Maersk drop off some
ridiculous amount of say about 2500 boxes (empties) so they are never going to run
out of stock but Hamburg Sud and Hapag Lloyd are more hand to mouth, where they
drop off enough boxes for each week. If we are doing a last minute booking and
increase it we find it quite hard to pick up a container”.
This could possibly influence the participant’s carrier selection going forward when
considering the issue with late bookings. They would know that they are less likely to
face problems trying to put through late bookings with Maersk than any of the other
lines. Maersk are the largest shipping line in the world so that explains their larger
resources. The country manager for Maersk in New Zealand was quoted in the New
Zealand Shipping Gazette discussing the potential shortage of equipment. The manager
explained the recent global financial meltdown had slowed the building of new reefers,
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and while Maersk themselves are equipped to manage current demand, any substantial
changes would compromise their ability to service shippers. If the biggest container line
is in such a position then the issue would be more pronounced with the other lines
because they are smaller and have fewer resources. The slower steaming strategies
adopted by the lines in recent times would slow down the turnaround of reefers so that
would contribute to equipment shortages.
Charters
Currently only one exporter is involved in the charters trade. An exporter has to have
the volume to make chartering economical. That is currently the case with this exporter,
“I would say about 26% of the volume is chartered and the rest is shipped in
containers”. The charter vessels used are conventional meaning the fruit is loaded on
pallets directly into refrigerated holds in the vessels. The advantage is the direct calling
afforded by such methods, the participant commented, “….it leaves Port Nelson then
onto Port of Napier and then arrives outside our coolstore in Antwerp”. The participant
further added,
“We get products into the market quicker……..it is 28 days to market compared to
42 days so you’ve got 14 days up your sleeve to get some serious sales under your
belt before anyone else gets in the market and that’s the key. We have also got the
volumes especially to Europe to be able to do that”.
Even though is takes several days to work these conventional ships, chartering gives the
exporter a lot more flexibility than that given by the container lines on their normal
routes. It’s not only the flexibility to be able to call into any port but also the reduced
lead times that allows the exporter to get into markets before other competitors do.
5.7 Looking Ahead
Expansion
The volume exported is set to increase going forward judging from the comments made
by the exporters. There are plans to widen the supply base as indicated by this
participant:
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“We’ve got orchards out there that are currently coming along, it takes about 2 to 3
years for the volumes to increase and come into supply. We’ve got new plantings
coming in, orchards we’ve purchased and orchards whose leases we’ve taken over so
yes we are expanding”.
Given the nature of consignment sales the exporters are able to advise their customers of
their expected increases and make alternative arrangements if need be. It was mentioned
earlier by one of the participants that the consignment customers take all their fruit and
more, so this puts the exporters in a very good position.
The attractiveness of the fixed price markets appears to be a source of great optimism
for the exporters. The potential benefits have seen increased marketing efforts directed
to that market as explained by the participant, “I’d probably say yes, we would like
to…..thinking of our strategy, like I said we are increasing to Asia at the same time
Europe isn’t going to contract”. Judging from the comments of the participant, despite
looking to increase the marketing effort to Asia they will look at maintaining and
increasing their sales to their traditional markets.
Another source of optimism stems from the performance of exclusive varieties. When
asked why they thought their sales would increase the participant said, “the new
varieties and also because of the likes of our Asian marketing at the moment, we are
getting pretty good returns. We have more growers bringing their volumes back to us”.
Looking back into the historical fortunes of the Braeburn and Royal Gala varieties, the
lack of exclusive growing and marketing rights for these varieties saw the rest of the
world eagerly adopt and profit off them. Having learnt from this period the protection
given to more recently developed varieties such as the Jazz™, Pacific Rose™ and
Envy™ prevents a repeat of the imitation. Judging from the comments made by the
participant below, the future of these new varieties looks bright:
“Last year we shipped about 1 million cartons (Jazz™), this year it’s going to be
about 1.4 million cartons. Next year it should be about 2 million cartons so that’s
going to keep growing to around 3 million cartons out of New Zealand. The Envy™
is our other new variety, this year we are going to ship about 15 000 cartons, next
year will be around 100 000 cartons so it’s just going to keep growing”.
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The exporters are always looking at contracting more suppliers as described by the
participant, “…we are always looking at opportunities as we go forward we’ll get more
growers and more packhouses coming on board with us that want to deal with us. So I’d
say yes over the next 5-10 years we will grow”.
The projected growth in supplies is also matched by plans to invest in more facilities,
the participant revealed that “as we get bigger we are going to have to increase our
storage capacity….the owners have those plans on the table at the moment”.
Australia
When the exporters were asked about their thoughts on the Australian ban on New
Zealand apples, and if they thought the issue would be resolved soon, the responses
given demonstrated nothing short of scepticism. One participant said “I think we’ll put
it in the wait and see bin”, another said “we’ll sit on the fence and wait”. The general
consensus was that the motives behind the ban were protectionist, and as previously
discussed, there was no justification for the ban today.
In the event that the local industry was given the green light, the exporters still
expressed scepticism, and expected the protectionism to persist. One participant said,
“Really they are being a bit like Japan because we can actually export apples to Japan
but the costs are prohibitive so nobody actually does it”. This was in reference to the
stringent phytosanitary requirements they expected to be imposed. The same participant
further explained, “I think it will be so regulated. There’ll be so many things put in
place to make it probably not worth it”.
The short transit times (about two days) and superior quality puts New Zealand in a
prime position to exploit the market in the event that all issues were resolved. One
participant expressed concern about sending just about the right amount of fruit over
there to get the best price. Aside from that all were confident they would do well in that
market.
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Chapter 6: The Port of Napier Container Terminal
6.1 Introduction
This chapter presents the second part of the findings of the research project. It is driven
by the second research objective, and that is to analyse the impact that seasonal reefer
cargo has on terminal operations. The impact of the pipfruit season is described by its
influence on specific terminal aspects such as pipfruit volumes, shipside operations,
reefer capacity utilisation, container dwell times and rehandles. The selection of these
aspects was influenced by the researcher’s experiences as a yard planner and by the
literature review.
The Port of Napier’s roots can be traced back to the 21st of October 1875 with the
passing of the Napier Harbour Board Act. The port and waterfront reforms of 1988-89
brought the Port of Napier Limited into existence (Anon, 2010c). The port company is
now wholly owned by the Hawkes Bay Regional Council after the latter purchased the
8% minority share holding previously held by the Horizon Regional Council on the 23rd
of December, 2009 (Anon, 2010b).
The port has an on-site empty depot and container terminal that share a 10 hectare
container pad. The terminal has a reachstacker/forklift operation that handled 167 225
TEUs (Twenty-Foot Equivalent Units) in 2008 and slightly less at 166 934 in 2009. The
company grossed just over NZ$47 million in 2008 and NZ$45 million in 2009 (Anon,
2010a).
Looking at the actual containers handled in table 6.1 below it is evident the terminal
handles just about as many imports as exports.
Year 2008 2009
Imports 51408 45% 53710 48%
Exports 55578 48% 53511 47%
DLRs 7688 7% 5682 5%
Container Counts 114674 100% 112903 100%
Table 6.1 – Containers Handled in the Terminal in 2008 and 2009
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The remaining percentage is made up from DLRs (Discharge Land Restows). These are
rehandles generated by the vessel planner to maximise stowage on board and ensure
containers are placed in discharge port rotation (last port of discharge on the bottom).
They are landed ashore temporarily and then restowed back on the vessel later on in the
exchange. Reefers made up 38% of exports in 2008 and 42% in 2009.
6.2 Export Handling
The port uses the complementary package Navis Express and SPARCS (Synchronous
Planning and Real Time Control System) as its terminal operating system. This gives
the terminal the real-time ability to automate activities from gate reception to vessel
loading, and vice versa. The port has a license for the Expert Decking module (the
process is depicted in figure 6.1 below) as part of the SPARCS component of the
terminal operating system. This manages containers in the yard using the ‘sort and store
strategy’ (Chen, 1999). To recap, in the ‘sort and store strategy’ containers of the same
group (allocation group in SPARCS terminology) are stacked together in the yard. The
group of a container contains its routing details, that is its outbound vessel, its port of
discharge, its size (20’ or 40’, 8’6” or 9’6”) and type (reefer or dry), its weight class
(light or heavy) and its International Maritime Organisation status (type of hazardous
cargo if it has any).
When an export container (reefer in this case) arrives at the gate its group details are
entered in the data base Navis Express. SPARCS then takes over and looks to match the
group of the reefer with any that are in the yard. If it finds a match, it will look to see if
there are any empty slots in that row and assigns the next available slot in that row to
the new arrival. The task will appear on the job queues of the forklift drivers on their
RDTs (Radio Data Terminals). When a driver selects a job it will disappear from the job
queues of other drivers so they see only those jobs that need completing. The container
is picked up and delivered by the forklift to its assigned position in the yard. Once the
container is landed the driver completes the job on his RDT to verify completion of the
task to the server. Upon receipt of the confirmation a message is sent from the server to
the RDTs (Radio Data Terminals) of the reefer care team instructing them to connect
the reefer. Upon physically connecting the reefer to power, the job is completed on the
RDT by the reefer care team.
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Figure 6.1 – The Expert Decking Process
The opposite happens when reefers are sequenced to load onto vessels, depart via truck
or rail, or to be moved to another yard position. A message is sent to the reefer care
team to disconnect it from power before the forklift driver moves it to the vessel, truck,
rail wagon or its new yard position. If SPARCS doesn’t find a match it will look to start
a new row if there are any free rows available. If the system is unable to match the
incoming container to existing ones in the yard or find a new row to start, it will alert
the yard planner on duty by ‘failing’. This allows the yard planner time to decide a new
position that best suits the operation at the time.
Container’s
routing details
entered in Express
Yes No SPARCS takes
over - does the
group match
any in the yard?
Group matches
and slot is
available
Group matches
but there are
no free slots
SPARCS assigns
position
New row
available so
SPARCS assigns
position
Yard planner
intervenes to
position box
No free rows so
box fails Yard planner
intervenes to
position box
No available
slots or new
rows so box
fails
Free slot and/or
new row
available so
SPARCS assigns
position
93
Reefers in the terminal are stacked to the second tier as opposed to dry containers that
are stacked to the fourth tier. Other than the technical limitation arising from power
supply, the second tier is convenient for the reefer care team who have to physically
unplug and plug the reefers when they are on the move, and to monitor them during
their stay in the yard. They can easily and safely mount ladders to reach the second tier
reefers, any higher would make this task unsafe and would need reefer towers to be
constructed to enable the reefer care staff to work safely.
6.3 The Pipfruit Export Season
The literature review in Chapter 3 was guided in part by the researcher’s experiences as
a yard planner at the Port of Napier container terminal. Seasonality as a phenomenon is
not tangible but what is visible are its manifestations. The literature review gave
confidence to the researcher to give an account of seasonality by analysing its
manifestations in the yard. As a result of this process the investigation of the impact of
the pipfruit season proceeded under the following categories, pipfruit volumes, shipside
operations, reefer capacity utilisation, container dwell times and rehandles.
6.3.1 Pipfruit volumes
The terminal handles about 36 different kinds of reefer commodities. In 2008 the top six
contributors by volume accounted for approximately 82% of the total volume of reefer
cargo. Pipfruit volumes were the largest, contributing approximately 33% of the total
volume of reefer cargo. Frozen lamb was the second highest contributing about 23% of
the total volume. The contrast between the flow of these two commodities through the
terminal over the year helps in depicting the seasonal nature of pipfruit in figure 6.2
below. Pipfruit volumes were very strong for about five months of the year where as
frozen lamb had a relatively even flow spread throughout the year. Only the top six
commodities by volume are shown below, the other 30 commodities make up the 18%
balance and most of those are less than 1% of the total volume.
The year 2009 depicts the same trend (see figure 6.3 below) only pipfruit gained a larger
share of the total volume, improving to 40% of total reefer cargo. This is a reflection of
the good harvest enjoyed by the industry for the 2009 season (Anon, 2009f).
94
Figure 6.2 – The Top Six Reefer Commodities by Volume for 2008
Figure 6.3 - The Top Six Reefer Commodities by Volume for 2009
Consequently, the top six commodities also contributed to a larger share of the total
volume of reefer cargo, improving to about 86%. Frozen lamb was once again the
second largest contributor weighing in with 19%. The balance, 14% came from the
95
other 30 commodities, most of them again contributing less than 1% to the total
volume.
Regardless of the slight differences in volumes betweeen the two years, what is evident
is that pipfruit is the dominant reefer commodity handled at the Port of Napier and is
therefore an important contributor to revenues generated from handling reefer cargo.
The challenges for the terminal arise because the majority of these reefers pass through
the terminal in the five months between March and July where as in comparison the
other five significant commodities are more evenly spread througout the year.
6.3.2 Shipside Operations
If the number of container vessel calls to the terminal between January 2008 and
December 2009 are expressed graphically as in figure 6.4 below, a seasonal trend
emerges that almost mimics the seasonal spike in reefer cargo during the pipfruit
season. The shipping lines have regular weekly and fortnightly services that call in at
the terminal. The rise in container vessel calls during the season is because of ‘extra
loaders’ or ‘ring-ins’ that the shipping lines deploy to cope with the increase in cargo.
Figure 6.4 – Container Vessel Calls 2008 -2009
96
The shipping lines also use these ‘extra loaders’ to reposition empty containers in
anticipation of the seasonal increase in reefer cargo. This in itself presents operational
challenges for the terminal because very large numbers of empties are discharged,
frequently in excess of 400 per vessel call. It only takes two or three large ‘empty
dumps’ like these to congest the yard. The yard planners have come up with novel ways
of dealing with this problem such as using empty stackers on shipside because they can
stack up to five or six high, as opposed to full container forklifts that only stack up to
four high. Empties are also stored in car parks, in aisles between yard blocks, and other
areas not normally designated for containers.
The yard planners have to keep all the empties that are stored at UCL in the terminal
because the Port doesn’t have a contract to keep them in the port container depot. These
consume storage space normally reserved for dry export cargo on the container pad. The
yard planners make special arrangements to work outside of normal gate hours to run
the trucks that move the empties to the offsite UCL depot. The trucks are able to move a
lot of these empties as there are no delays from other trucks as experienced during
normal gate hours. This helps in freeing up scarce storage space in the yard.
Figure 6.5 – Average Vessel Turnaround Time 2008 -2009
97
Another significant trend can be seen in the average vessel turnaround time in figure 6.5
above. This is explicitly the time between the first container moved and the last.
Looking again at the trend for the period between January 2008 and December 2009 in
figure 6.5 above, the average length of each vessel exchange increases during the
pipfruit season. This isn’t just a result of the increased reefer cargo but also because the
shiping lines reposition large volumes of empty containers in anticipation of the
increased business. The combined increase in discharge and loading volumes during the
season result in the increased vessel exchange times.
Figure 6.5 however does mask the fact that the greater volumes handled allow for the
use of three cranes (gangs) on vessels during the season when the norm is two. This has
to be balanced out with forklift requirements and driver hours in other areas of the port.
Sometimes it isn’t possible to work three gangs on vessels while the gate is open
because there may not be sufficient forklifts available to effeciently work R and D
(Receiving and Delivery) as well as the vessel. It is standard practice to assign two
forklifts to a crane and to have at least three forklifts operating on R and D. This is also
assuming that there are none in the workshop for maintenance or repair work.
6.3.3 Reefer Capacity Utilisation
Building on from the previous sections, the onset of the pipfruit season sees an increase
in reefer capacity utilisation in the terminal. As shown in figure 6.6 below for the
months of March, April and May of 2009, the average number of live reefers in the
terminal each day exceeds the available reefer power points. If the total number of
reefers over the year shown below is averaged out, this turns out to be about 404 live
reefers per day in the terminal. Given that the terminal has 824 operational power
points, the terminal should be able to comfortabley handle 404 reefers per day.
However, the pipfruit season brings reefer volume surges well above this average as
shown in figure 6.6 below.
The terminal has developed ‘coping mechanisms’ to address the shortfall of power
points.Upon reaching the point where the terminal reefer capacity is exhausted, the yard
98
planners can turn to an 80 power point generator. The generator is used by the yard
planners in two ways:
Figure 6.6 – Average Number of Live Reefers in Port per Day
The yard planners can reserve the generator for ‘large port marks’. ‘Large port marks’
are a large number of reefers destined for the same port of discharge on the same vessel.
The significance of this can be best explained by figure 6.7 below. Most of the reefer
bays in the terminal have two-way access as shown below (figure 6.7) and are 3 rows
deep. The different colours above represent two different port marks. There are also
bays with one way access as shown in figure 6.8 below, meaning only one port mark
can occupy the 12 slots available ideally. Going back to the generator, if large port
marks are allowed to occupy these shorter rows in figure 6.7 below, then an undesirable
situation arises in which small port marks occupy longer bays and only partially filling
them. This inevitably leads to ‘mixing of stacks’ much earlier than necessary. Reserving
the generator for large port marks frees up more of these shorter bays for the smaller
port marks, and results in more efficient use of the scarce reefer space.
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Figure 6.7 – A Two-way Access Bay
The second way the yard planners use the generator is to ‘dump’ reefers arriving a few
days in advance of their intended departure on it, and sort those to the yard once
working vessels free up reefer space.
Figure 6.8 – One Way Access Bay
100
The generator is mostly sufficient to deal with the overflow except in the busiest month
of April. Going back to figure 6.6, in April the terminal and the generator reefer
capacity are insufficient to meet demand. The empty container depot uses 172 power
points to service empty reefers readying them for carriage of temperature sensitive
cargo like pipfruit or meat. The empty depot lends some of its power points to the
terminal when their service schedules permit, giving the terminal the ability to at least
make sure every reefer is powered.
The port runs an extended gate service during the pipfruit season. Management
acknowledges that truck turnaround times lengthen during the season because of the
higher volume of trucks movements. Normally, the gate operates between the hours of
0700hrs and 1800hrs while also providing a late booking service between 1800hrs and
2300hrs by prior arrangement only. The gate is open between 0700hrs and 1200hrs on
Saturdays and shut on Sundays. During the season the gate shuts at 1900hrs during the
week and at 1400hrs on Saturday. This compensates shippers for the extended truck
turnaround times and allows them to get containers into the terminal in time for vessel
calls. All shippers take advantage of the late booking service to bring containers in the
terminal that they couldn’t during normal gate hours. There is a marked increase in its
use during the pipfruit season.
6.3.4 Container Dwell Times
The literature review in Chapter 3 revealed the issue of container dwell time to be
closely linked with capacity issues. Terminals have sought to increase capacity by
increasing the velocity of containers moving through by limiting their dwell times (Le-
Griffin & Murphy, 2006). Analysis of the monthly average reefer dwell time for the last
two years revealed an interesting trend as shown in figure 6.9 below. The average reefer
dwell times were lower in the pipfruit season months when compared to the rest of the
year. The Port of Napier imposes a daily charge for every reefer stored in the terminal,
which includes power and reefer monitoring charges, as well as a seasonal surcharge
during the pipfruit season. This is not to imply that it causes of the trend seen below.
101
Figure 6.9 – The Average Reefer Dwell Time
In the months outside of the pipfruit season when there is no pressure on reefer capacity
average dwell times are higher. This could be explained by shippers managing to pack
reefers relatively well in advance of vessel calls because there is less pressure on them
due to the lower volumes they move. The lower dwell times in the pipfruit season could
be indicative of the pressure exporters are under to ship large volumes in a limited time
window. This could curtail their ability to stay well ahead of schedule so they are
almost packing reefers on a ‘just-in-time’ basis.
6.3.5 Rehandles
Revisiting the definition given in Chapter 3 a rehandle is defined as a container moved
from one yard position to another. In other words it is a ‘yard shift’. As identified in the
literature review in Chapter 3 there are a number of reasons why rehandles arise,
namely when the pre-marshalling strategy is employed, whenever there is a change of
destination or vessel on a container, and when a target container is ‘buried’ because a
stack is mixed, or because of weight requirements on a vessel (Chen, 1999).
102
Figure 6.10 – Rehandles 2008-2009
The number of rehandles performed in the terminal is presented in figure 6.10 above
over a two year period. The number of rehandles is largely influenced by reefer capacity
utilisation. The months with the spikes in the number of rehandles correspond to the
months when reefer volumes place huge demands on reefer points in the terminal. As
explained earlier, the nature of the reefer handling operation during the pipfruit season
forces the yard planners to mix stacks in order to accommodate the increased volumes.
The yard planners employ the ‘pre-marshalling strategy’ where they block stack reefers
for later vessel calls and sort them closer to the time when vessels start work (Chen,
1999). The rehandles arising from this constitute the bulk of the rehandles in the pipfruit
season.
Shifting reefers in the yard is a labour and resource (forklifts) intensive activity
especially in the pipfruit season when operational demands on both are already high.
These rehandles can only be done when and if ‘quiet periods’ can be found. Rehandles
occur throughout the year though not at the same level as during the pipfruit season.
Despite the yard planners’ efforts at ‘sorting’ mixed stacks they do not always achieve
completely homogenous stacks because of the high demand on reefer space during the
busy period. Some of the rehandles arise during vessel exchanges where reefers are
moved to retrieve target containers. These kinds of rehandles also occur when
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containers have their routing details changed as shown below in figure 6.11 below. If
the vessel for the purple containers works first then the container in front would need to
be moved out of the way. Similarly to retrieve the black one, the two amber containers
would need to be moved out of the way. Although the vessel planners can work around
these situations when sequencing containers for vessel loading, it is not always possible.
Rehandles arise also because of weight requirements of vessels. Lighter boxes can be in
front of heavier ones in the stacks when heavier ones would be required first.
Figure 6.11 – Bays Showing Containers with a Change of Vessel
Outside of the season, there is little need to employ the pre-marshalling strategy because
there is much less demand on reefer capacity. It is likely rehandles arise because of a
change in reefers’ routing details and because of vessel weight requirements. There is
ample space in the yard outside of the pipfruit season to effectively employ the ‘sort and
store strategy’ so rehandles decline as shown in figure 6.10 above (Chen, 1999).
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Chapter 7: Conclusions
7.1 Introduction
This chapter summarises the findings and draws conclusions based on the research
objectives listed below:
1.To explore the motives behind the actions of the pipfruit exporters.
2.To analyse the impact seasonal reefer cargo has on terminal operations.
The limitations of the research are then explained before concluding with suggestions
for further research.
7.2 Conclusions
7.2.1 The Motives Behind the Actions of the Exporters
The exporters showed they are on the path towards full vertical integration as evidenced
by their significant investments in orchards and fruit handling facilities. This reveals the
exporters’ desire to exert control over these critical aspects of their existence. Most of
the fruit they handle comes from their own sources, and they have plans in motion to
increase output. In situations where third parties supply fruit, the exporters strive to
establish long term relationships. This is enabled by their fair payment systems and
supplier development initiatives to encourage loyalty. As the exporters have less of a
physical presence in the Nelson region, the establishment of long term relationships is
particularly important given their greater reliance on third party supplies in that region.
The exporters are thus able to secure the majority of their supplies and protect
themselves from what can be harmful variable supplies. They are also able gain
economies of scale with many of their activities such as packing, cool storage and
shipping.
As the exporters have matured they have managed to match the volumes they handle
with investments in fruit handling facilities. The guaranteed volumes of fruit justify the
investments made in coolstores and packhouses though third party fruit handlers are
contracted to handle overflow. There is one distinct advantage to using owned or leased
facilities, and that is of control. The exporters have more flexibility in prioritising
105
shipments in their own or leased facilities than in third party facilities. The exporters
take advantage of the expertise of the owner operators in the Nelson region, where the
latter oversee their own operations from picking to delivering containers to the port. The
exporters play the role of facilitator as they have the global view of the situation, and
coordinate the actions of these third parties, particularly as containers can travel to
several sites to be filled.
The trend towards vertical integration is complemented by the investment in
information systems that have helped forge a virtual network spanning entire supply
chains. The flow of fruit in the supply chain is enabled by the flow of information in
both directions of the network. All exporters have developed enterprise wide systems
that are complemented by the use of bar coding and EDI to transfer information
seamlessly and cost effectively along the supply chain. These information systems
automate most of the previously manual and time consuming processes by eliminating
duplication of data entry tasks, increasing the accuracy of such tasks, increasing
visibility in the system and satisfying traceability requirements of their retailer
customers. The exporters use the technology available to improve communication with
stakeholders such as the road carriers, where they are emailing through releases as
opposed to phoning them through. Exporters are also using the Internet to check
equipment availability and CEDOs for their containers on the port website to avoid
delays where possible. The port website also allows them to check vessel arrival times
(ETAs) in real time, which they use to manage their work flows better. The exporters
communicate with the shipping lines regularly by phone and email to keep abreast of
any developments and solve daily issues as they arise.
The control afforded to the exporters by vertical integration means that most of the
compliance programs they are part of are implemented in-house. This gives the
exporters far greater flexibility in deciding what fruit they grow for which markets,
while considering all the different compliance programs. This flexibility is diminished
when taking fruit from third parties because they would be compliant with particular
programs that may not be ideal to the exporter. The exporters get around this by
establishing long term relationships with third parties, and then operating as though they
were part of the enterprise. The overriding objectives would be to meet importing
countries’ phytosanitary requirements, border security requirements, as well as retailer
106
minimum requirements. The exporters see value in being part of the SES (Secure
Export Scheme) Customs program. This was set up to guarantee importing nations that
shipments are unlikely to be used in terrorist activities and hence their containers are
less likely to experience costly delays at ports of entry in overseas markets. Industry
initiated compliance programs such as IFP (Integrate Fruit Production) and the Apple
Futures program enable exporters to meet the food safety and sustainable production
requirements of retail customers, as well as providing exporters with a competitive
advantage in the markets.
Consignment sales to the traditional markets of the US, the UK and continental Europe
give the exporters stability and visibility in their operations as they can see what they
have to do most of the selling season. They have cultivated relationships with retailers
to be able to negotiate programs for volumes and prices prior to the selling season, and
are able to readjust their volumes after harvesting, and consequently work out fruit
handling, packaging and shipping space requirements. This would enable them to know
how much fruit they would need to get off third party fruit suppliers to fulfil their
contracts, and to know what volumes they would need to hand off to third party fruit
handlers if need be. One exporter managed to get their retail customers to agree on a
minimum price to protect themselves from currency fluctuations.
The rest of the sales are on fixed price to the relatively new markets of mainly Asia, the
Middle East and Russia. Although these sales are frequently on short notice, and burden
the logistics system as the exporters have to expedite shipments to the market to get the
best prices, they do have their attractions to the exporters. Customers usually pay
upfront and the transit times are shorter than to the traditional European and American
customers. The fixed prices reduce risks to the exporters, compared with consignment
sales where prices fluctuate with the exchange rates. The attractions are why the
exporters are increasingly focusing their marketing effort to these regions.
The New Zealand pipfruit industry has taken to licensing new varieties developed to
prevent a repeat of the imitation of Braeburn and Royal Gala by most of its competitors.
This strategy has been further developed by ENZA who have established licensed
orchards in 12 other countries in both hemispheres. This has given ENZA a way of
circumventing the 1921 ban on New Zealand apples in the Australian market. The
107
licensed orchards in both hemispheres give ENZA distinct advantages when negotiating
with retailers as they are able to supply fresh fruit all year round, and not have to solely
depend on stock from coolstores to service markets out of season.
The exporters form mutually beneficial marketing alliances when opportunities present
themselves. The competences ENZA has built over time as the NZAPMB are attractive
to other exporters because they have bought into distribution channels with good retail
customers in the US and the UK. The benefits arise from the economies of scale the
exporters derive from their combined volumes that lower costs such as in shipping and
marketing. The licensing of newly developed varieties enables the exporters to create
niche pockets in the markets.
Recent developments in the shipping industry such as increased vessel sharing
agreements, and shipping lines optimising their operations by sailing vessels full in and
out of New Zealand, have seen a decrease in shipping space outbound from New
Zealand. This has cut down the options of the exporters significantly. Despite the
exporters using transit times and port calls as a means for carrier selection, they have to
base their marketing plans around the transit times offered by the shipping lines. This is
not an ideal situation as the transit times have extended in recent times owing to slow
steaming strategies adopted by the lines to reduce fuel costs, and switching from direct
to relay operations. The shipping lines have insisted on the exporters giving them
forecasts of their shipping space requirements and they are holding them to that. It is in
the exporters’ interests to forecast their requirements accurately to be guaranteed the
shipping space they require. There is evidence to suggest that the larger exporters get
special treatment from the lines when shipping space is tight, otherwise the exporters
understand the value of establishing and maintaining good relationships with the lines.
In giving the shipping lines forecasts the exporters expect the equipment to be there
when they need it, as well as the shipping space. Equipment shortages do arise and their
impact is felt worse with the fixed price trade as late shipments fetch less money.
One exporter has found a way around the problem of working to the schedules of the
shipping lines by chartering vessels, and hence reducing reliance on the powerful
shipping lines. Not only are they able to get direct calls and shorter transit times, they
are also able to get into the market first before any other exporter does.
108
The exporters are optimistic about their future given the investments they made in new
plantings, plans to purchase and lease more orchards, as well as plans to increase their
fruit handling capacity. This optimism stems from the progress they have made in the
fixed price trade and the exclusive varieties selling well in markets. The Australian
market remains closed to New Zealand exports and even though the government has
made progress at the WTO in their dispute against the Australian ban, the exporters are
sceptical about the ban being lifted any time soon.
7.2.2 Analysis of the Impact Seasonal Reefer Cargo has on Terminal Operations
The pipfruit export season is best described by its influence on specific aspects of
terminal operations. Analysis of the annual flow of reefer commodities at the Port of
Napier container terminal revealed the seasonal nature of pipfruit volumes. The latter
contribute just over a third of all reefer commodities but most of that passes through the
terminal in the five months between March and July. Comparatively the other reefer
commodities have a much more even spread throughout the year.
The seasonal spike in reefer volumes is matched by an increase in vessel calls at the
terminal. This is the result of the shipping lines deploying extra loaders to cope with the
increased volumes. These complement the vessels they have on their normal schedules,
and are also used to reposition empty containers in anticipation of the increased
business. This sees a sharp rise in containers discharged, most of the times in excess of
400. These present operational challenges to the yard planners who confront the
problems faced in a variety of ways. They use empty stackers on shipside operations
because they stack higher, they use unconventional areas such as car parks to stack
empties and they organise the trucking firm that carts the empties to UCL to work after
the gate shuts to get a better turnover of scarce space. The vessel exchange times also
lengthen during the pipfruit season reflecting the increased discharge and load volumes.
This however does mask the increased use of three crane gangs that is much more
common during the pipfruit season as the terminal looks to turnaround vessels faster.
An examination of the reefer capacity utilisation revealed a sharp rise in demand on
reefer power points during the pipfruit season, particularly between March and May,
when the average number of reefers handled daily exceeds the number of power points
in the terminal. The yard planners turn to a generator that provides additional power,
109
and they can use the empty depot’s power points if demand warrants that too. During
the season there is a marked increase in the use of the late gate service further reflecting
the pressure shippers are working under.
An examination of the reefer dwell times revealed them to be lower in the season than
outside of it. This is again, possibly a reflection of the pressure the exporters work under
as the sheer volume of fruit handled curtails their ability to pack well ahead of schedule.
Outside of the pipfruit season the dwell times extend indicating that non-pipfruit
shippers are under much less pressure, and are able to pack ahead of schedule given
they send their reefers to the terminal earlier.
The number of rehandles was shown to rise sharply during the pipfruit season though
they do occur outside of the season. Despite the ample reefer storage space available
outside of the season, rehandles occur because occasionally reefers will have their
routing details changed, and reefers might need to be moved to accommodate weight
requirements on vessel loading. During the season as previously mentioned, the yard
planners employ the pre-marshalling strategy to deal with the huge volumes of reefers
that put pressure on the terminal’s reefer handling capacity (Chen, 1999). This is
responsible for the sharp rise in rehandles during the season.
To conclude this section, the research objectives of this research project have been
achieved. The findings of Chapter 5 gave the researcher a much better appreciation of
what the exporters face during the pipfruit season, an understanding of how they have
matured, and why they conduct their operations they way they do. The literature review
and the findings of Chapter 6 gave the researcher a much more balanced appreciation of
the workings of container terminals. A more global view and understanding of
seasonality at the Port of Napier has thus been gained as a result.
7.3 Limitations
As this was a single case study, the inclusion of Port Nelson to make it a multiple case
study would have addressed the external validity problem of single case studies. Port
Nelson happens to be in New Zealand’s second largest pipfruit growing region. Time
limitations prevented the researcher from interviewing more exporters, particularly as
those that agreed were all large exporters. A convenience sample was used as a result of
110
those time constraints. The analysis would have been better had there been input from
the smaller exporters, and senior managers could have provided different insights on the
issue. This study was exploratory considering time and cost constraints, in an ideal
situation the exploratory study could have been used to identify specific areas for
further investigation (Collis & Hussey, 2003).
7.4 Future Research
There is a need for future research to focus on the current capacity of New Zealand
ports and that of the distribution networks they are a part of considering the
contemporary trends of larger vessels calling to New Zealand, and greater liberalisation
of global trade. This will enable deficiencies to be identified and solutions formulated to
address them in a timely manner. Future research could also focus on investigating the
nature of the port and shipper/importer relationship, and to help find ways of improving
that interface in the New Zealand context. The solutions to the problems of distribution
networks need a global approach, and the research would help increasing the level of
collaboration amongst stakeholders.
111
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Appendices Appendix A: Interview Request Email Dear Sir/Madam
By way of introduction I’m an extramural student with Massey University and am
employed by the Port of Napier as a Ship Planner. I got your email off Andrew Locke,
the Business Development Manager at the port. I’m currently writing my thesis
towards a Masters in Logistics and Supply Chain Management. My research is focused
on exploring the pipfruit export season and the hope is to gain a better understanding of
the industry.
This is an invitation for your firm to become a part of this study. It is entirely voluntary
so your consent would be greatly appreciated as it would help me to complete my
studies. My motivation for this research project stems from my experiences over the last
few years as a Yard Planner in the Port’s container terminal. I’ve only ever witnessed
the manifestations of the pipfruit export season from the terminal end, and have always
been curious about what happens from the exporters end.
I’d like to interview the person responsible for the logistics functions in your
organisation, once, for about an hour. The interview will be recorded with a digital
device and transcribed. I’d be more than happy to provide a transcript. I guarantee
complete confidentiality in my report and only my Massey supervisor, Dr Norman Marr
and I will have access to any data collected. A summary of the findings may be used by
the Port of Napier to help in making better informed decisions going forward.
If you have any questions please don’t hesitate to contact my supervisor Dr Norman
Marr on 06 350 5226 or [email protected] or myself on 06 835 7923 or
Yours sincerely,
Karl Mudzamba
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Appendix B: Interview Questionnaire
1.How do you source your fruit?
Do you source fruit from the same growers?
Do you have any issues filling quotas with respect to competition from other exporters?
2.Could you describe the process in which fruit is sourced from the growers and ends up at
the container terminal?
3.Do you own or lease the facilities in your distribution chain from the growers to the
container terminal?
What are your reasons for your choice?
4.What constraints do you face in the distribution chain from the growers to the port?
Do you face any capacity constraints in coolstores, packhouses and reefers equipment?
Do you have any policy constraints (operational procedures that hinder efficiency)?
How is the service provided by the trucking firms you use?
5.What information and communication technologies do you use in your operation?
To communicate with relevant stakeholders (lines, trucking firms, port, overseas
customers…etc)
6.What do you think of the service you are given by the shipping lines?
Transit time to market?
Port calls?
What could they do better for you?
7.What do you think of the service given to you by the Port of Napier?
What could the port do better for you?
8.Looking ahead do you anticipate shipping more or less fruit over the next 5 – 10 years?
What are your reasons for your position?
What are your thoughts on the Australian situation?
9.Is there anything you would like to ask me about related to the service provided by the
Port of Napier container terminal?